There are countless shares offering exciting growth potential in the stock market right now. However, I don’t think this trio do, which is why I’m avoiding them like the plague.
Losing market share
The first stock I’d give a wide berth to is boohoo (LSE: BOO). It’s share price has collapsed from 413p in the June 2020 to just 32p today. That’s a 92% drop! Ouch.
What’s gone wrong here? Well, one big problem has been competition, notably from Shein. Last year, the Chinese fast fashion juggernaut reportedly doubled its profits to $2bn. That’s more than loss-making boohoo generated in annual revenue.
To improve its US customer proposition, boohoo opened a warehouse in Pennsylvania in 2023. This would be a “complete gamechanger” said CEO John Lyttle at the time, highlighting the quicker delivery times.
Fast-forward a year, the US warehouse is shutting and there are reports that boohoo may break itself up. Apparently Debenhams and Karen Millen, store brands from a bygone era, could be sold or spun off.
Admittedly, these moves do have the potential to unlock some value and move the firm back into the black. But that won’t change the cut-throat competitive dynamics in the fast fashion industry.
Shein has all the things boohoo doesn’t — rising customers and sales, surging profits, and momentum. If it also goes public, possibly in London, it’ll have a huge new war chest of cash. I’m avoiding boohoo stock.
Balance sheet worries
Next up is Aston Martin (LSE: AML), the British luxury car brand associated with the James Bond films. Unfortunately, the share price has fallen off the kind of steep cliff Bond would effortlessly abseil down.
The reason for this 90% collapse over five years is due to mounting worries about the company’s losses and the health of its balance sheet.
There was no comfort to be found in a recent update when it reported tepid demand in China and supply chain headaches. It said it’ll deliver 1,000 less cars than expected this year.
Consequently, margins will be lower and Aston no longer expects to be free cash flow positive for the second half of 2024. This profit warning wasn’t well-received and the stock has since tanked by 30%.
On the positive side, the carmaker will start next year with “a fully reinvigorated portfolio of ultra-luxury high performance models“. It reckons this will allow it to grow sales and improve profitability in FY25.
Worryingly though, analysts at Jefferies see FY24 cash outflow of £424m, resulting in net debt of £1.4bn. It seems almost certain that Aston will need more cash. I have no plans to invest.
Meme stock
Finally, there’s Trump Media & Technology Group. This operates Truth Social, the social media platform affiliated with former president Donald Trump.
I was bearish on this meme stock in April at $46. Now at $16, I still wouldn’t touch it with a 10-foot bargepole.
In Q2, the firm reported a net loss of $16.4m on revenue of $836,900 (that’s not millions!). Yet the market cap here is $3.2bn. The valuation is simply detached from reality.
I’d expect the stock to rise if Trump is re-elected in November, yet I want no part of it. I think there are far better shares for me to buy and hold today.
