These 3 Stocks Have Seen Their Shadows. Expect Rough Times Ahead

By Markets Fool.com

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Source: April King via Wikimedia Commons.

We're bullish on plenty of stocks in 2015, but others have too many factors working against them. We asked three of our analysts which stocks they think have rough times ahead of them, and here's what they had to say.

Dan Caplinger
The casino/resort industry has gone through significant turmoil lately, and MGM Resorts looks like it might be about to have another spell of bad luck. During the financial crisis in 2008, MGM suffered huge losses as a result of its ill-timed CityCenter project in Las Vegas, which burdened MGM with crushing amounts of debt and suffered construction mistakes that could shortly result in the demolition of one of its primary buildings.

Now there's trouble in the Asian gaming capital of Macau, where a Chinese government crackdown on corruption has caused gaming revenue to fall in recent months. This comes as MGM aims to open a new resort in the middle of the lucrative Cotai Strip late next year. The $2.6 billion, 1,600-room property would dramatically increase MGM's exposure to Macau.

Admittedly, Macau might recover, in which case MGM's investment could still pan out. Moreover, Las Vegas has held up reasonably well in the wake of Macau's setback, and an expanding U.S. economy could make MGM's strong presence in Sin City an asset rather than a liability. Nevertheless, the danger of having lightning strike twice makes MGM a risky proposition right now. Until the Macau slowdown runs its course, conservative investors should steer clear of MGM stock.

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Leo Sun
Action camera maker GoPro doubled from its IPO price of $24 to $48 on its first day of trading last July, surged to over $90 by October, and then recently tumbled back to about $50. Unfortunately, it might head even lower in 2015.

On the surface, GoPro's growth looks great. Last quarter, revenue rose 45.7% year over year to $280 million, and it posted net income of $14.6 million -- up from a loss of $1.1 million a year earlier. Gross margin improved from 33.3% to 44.3%.

But looking ahead, that growth will likely shrink. In 2013, GoPro's revenue rose 87.4% year over year. Wall Street expects that growth to slow to 36% at the end of 2014 and to 24% in 2015. The stock also still trades at a pricey trailing P/E of 148. As for its bottom line, cheaper competing action cams forced GoPro to launch a $129 entry-level HERO camera last year. This down-market move from its premium $399-$499 price range could cannibalize sales and impact margins throughout 2015.

Recent reports ofApple's potential entry into the action camera market also spooked investors, causing GoPro stock to plummet 12% in a single day. Consumer photography drones -- which GoPro could reportedly launch this year -- represent a potential new source of sales growth, but new Federal Aviation Administration regulations could disrupt those efforts. Therefore investors should weigh the risks carefully before investing in GoPro's growth story.

Brian Stoffel
Herbalife
has been a battleground stock ever since hedge fund tycoon Bill Ackman announced that his Pershing Square Capital had taken a nearly $1 billion short position in the stock in late 2012. According to Ackman, the nutrition and weight management products specialist is a pyramid scheme that targets poor and minority populations.

While Ackman has promised a "death blow" of smoking-gun evidence in the past, that hasn't materialized. Instead, he has helped to raise enough concerns that the FBI, Department of Justice, and Federal Trade Commission have all opened investigations into the company.

Even if the investigations clear Herbalife of wrongdoing, I believe this company's boom days are over. Evidence has surfaced showing Herbalife management knew as far back as 2005 that the company's practices were more than a little shady.

Now, the company is reworking many of the policies that helped it juice returns for so long. It has capped the number of products a new customer can buy, and becoming a coveted "sales leader" has grown more difficult. This has resulted in slumping sales, and I expect that trend to continue.

The article These 3 Stocks Have Seen Their Shadows. Expect Rough Times Ahead originally appeared on Fool.com.

Brian Stoffel owns shares of Apple. Dan Caplinger owns shares of Apple. Leo Sun owns shares of Apple. The Motley Fool recommends Apple and GoPro. The Motley Fool owns shares of Apple. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.