As the market continues its volatility, it’s best to focus on specific stocks to generate gains. But it’s also essential to make sure to avoid stocks that could cause losses. That’s why investors should consider our proprietary POWR Ratings system that upgrades and downgrades socks daily. 

Though the market could be headed for a spring and summer bull run with the reopening of the economy, it’s best to avoid stocks that have recently been downgraded in the POWR Ratings. These stocks have a high chance of underperforming in the months ahead.

The following stocks were recently downgraded to F grades in the POWR Ratings, meaning they are Strong Sells: AmWell (AMWL), Shift4 Payments (FOUR), and Dave & Buster’s Entertainment (PLAY).

AmWell (AMWL)

AMWL has D grades in the Value, Sentiment, and Quality components of the POWR Ratings. Click here to learn how AMWL fares in the Momentum, Growth, and Stability components. Of the 78 stocks in the Medical – Services industry, AMWL is ranked 73rd. You can find the top stocks in this industry by clicking here.

This telehealth specialist had a mixed performance in the fourth quarter with revenue skyrocketing, yet its net loss also jumped. Add in the fact that company executives admitted AMWL’s growth would slow in 2021, and there is even more reason to question the logic in investing in the company.

AMWL had a net loss of more than $50 million in the quarter. The company suffered a net loss of slightly less than half that amount in the same quarter in the year prior. AMWL’s adjusted EBITDA loss in the quarter was $35.4 million compared to the EBITDA loss of slightly less than $17 million in the same quarter from a year ago.

Shift4 Payments (FOUR)

FOUR, an integrated payment processing and tech solutions specialist, has an absurdly high forward P/E ratio of 146.34. The stock is currently trading about $16 below its 52-week high of $99.27.

FOUR has an F grade in the Growth component of the POWR Ratings along with D grades in the Value, Sentiment, and Stability components. You can learn more about FOUR’s grades in Momentum and Quality by clicking here. Of the 80 publicly traded companies in the Technology – Services industry, FOUR is ranked 76th. Click here to find the top stocks in this industry.

Analysts have soured on FOUR, establishing an average target price of $64.30. If FOUR dips to this level, it will have declined by more than 14%. The lowest target price for the stock is $46. The potential dilution of FOUR share value combined with the fact that it is stuck in the red makes this payment processing stock quite risky.

Dave & Buster’s Entertainment (PLAY)

PLAY is still in business after nearly four decades of operation. The company has nearly 140 stores in 39 states. PLAY also has a presence in Canada and Puerto Rico. It isn’t hard to figure out why PLAY has struggled this past year. PLAY locations have either been closed or operated with limited hours as a result of the pandemic. Though it appears arcades such as those owned by PLAY are reopening, the company has a lot of ground to make up after a disaster of a year.

PLAY has an F grade in the POWR Ratings’ growth component and D grades in the Quality, Sentiment, and Stability components. Click here to learn how PLAY fares in the Value and Momentum components. Of the 46 stocks in the Restaurants industry, PLAY is ranked dead last. You can learn more about publicly traded restaurants and similar businesses by clicking here.

Analysts are also quite bearish on PLAY, setting an average target price of $32.20. If PLAY drops to this level, it will have declined by more than 20%.

The pending reopening of the economy certainly bodes well for PLAY, yet it will take time to make up for the financial carnage stemming from the lost year of 2020. The stock is priced $5 below its 52-week high of $51.73, meaning it is likely overvalued at its current level. PLAY might be a solid investment a year from now after the coronavirus crisis is behind us, yet it is simply too risky of a play at the current moment.

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AMWL shares were trading at $16.80 per share on Tuesday morning, down $0.16 (-0.94%). Year-to-date, AMWL has declined -33.68%, versus a 5.87% rise in the benchmark S&P 500 index during the same period.

About the Author: Patrick Ryan

Patrick Ryan has more than a dozen years of investing experience with a focus on information technology, consumer and entertainment sectors. In addition to working for StockNews, Patrick has also written for Wealth Authority and Fallon Wealth Management. More...

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