If you’ve had an unexpected cash inflow, you might think there’s no harm in investing in risky stocks, or even playing with them.
But whether you win the lottery or save up money for years to invest, you need to be careful about it because sound financial decisions can help you set yourself up for a brighter future down the road. can be found. And there are also opportunity costs to consider, including the profits and gains you make from poor investment decisions.
Some stocks I wouldn’t invest in right now — even if the money fell out of the sky — are novavax (NVX -1.43%) and fuboTV (FUBO -7.97%). For that reason, you should stay away from these two stocks right now.
Novavax shares have been a volatile investment over the past several years. There’s a lot of excitement about its COVID-19 vaccine, but there are also concerns about what will happen next for the company. Shares peaked over $300 last year and are down about $40 today.
The stock fell after the company released strong quarterly earnings earlier this month, which also saw guidance cut significantly. Accordingly, Novavax reduced the previous guidance, which called for sales between $4 billion and $5 billion, to a range between $2 billion and $2.3 billion.
This is a scary move that came without warning. Although the company’s vaccine received emergency use approval from the Food and Drug Administration last month, it’s not approved for use in adolescents or as a booster shot, and there’s no doubt its sales potential will be impacted.
The company currently has Phase 3 trials underway for NanoFlu, but there just isn’t enough capacity here to make the stock worth the risk. Novavax is incredibly volatile, having burned $744 million to support day-to-day operations over the past 12 months while losing about $1.5 billion in that time.
This stock is already down 84% over the past year, but I can see it falling even more in the coming months.
2. Fubo TV
Another money-burning business I wouldn’t dare invest in is fuboTV. Operating cash burn over the past year is $323 million, but the streaming company has far less cash and short-term investments on its books than Novavax ($373 million vs $1.4 billion for the vaccine maker) .
As a result, the situation could become even more dangerous for fuboTV given its low financial buffer. fuboTV generated revenue of $852 million in the last 12 months, but the net loss during that period was $475 million.
A big problem with the business is that fuboTV overspends on content; For the three months ended June 30, customer-related spend of $219 million exceeded the $200 million generated by the company from subscriptions. Once you add other overheads and operating expenses, the company has little hope of turning a profit anytime soon.
A big part of the problem could be that unlike other streaming companies, fuboTV focuses on sports, which can be costly to win the rights to stream. The company bills itself as “the world’s only sports-focused live TV streaming service featuring top leagues and teams.”
Before this growth stock can become a more sustainable investment, fuboTV’s margins need to improve significantly. It shouldn’t come as a surprise that shares are down 85% over the past year and are performing just as badly as Novavax. Both stocks currently look like risky buys.
David Jagielski has no position in any of the stocks mentioned. Near The Motley Fool fuboTV, Inc. Has Reviews and Recommended. The Motley Fool has a disclosure policy.