In this special presentation we're looking at stocks that investors should be selling now. When the market is down, there is a temptation to look at deeply discounted stocks to buy and hold. But buying the dip is a strategy that fits stocks that have a proven track record of growth in revenue and – more importantly – earnings.
But when a stock is not scoring well on either of these fronts, it's time for investors to challenge the reason(s) why they own the stock. If the stock no longer fits that thesis, it's likely time to sell.
This doesn't mean you can't find hidden gems that are flying under the radar for whatever reason. But even in those cases, you have to see a business case that supports owning the stock. If that case no longer exists, loyalty to that stock is a one-way proposition.
This strategy applies to both bull and bear markets. That's because some sectors are better to buy at different times. The end of the year is a good time to reassess your portfolio and weed out the stocks that are no longer serving you well. If you own any of the following stocks, they may be candidates to sell.
Quick Links
- FuboTV Inc.
- DocuSign, Inc.
- Carvana Co.
- Vroom, Inc.
- Stitch Fix, Inc.
- Rocket Companies, Inc.
- Beyond Meat, Inc.
#1 - FuboTV Inc. (NYSE:FUBO)
I’ll start this presentation by practicing what I’m preaching. I bought FuboTV Inc. (NYSE:FUBO) in early 2022. I was attracted to the idea of a streaming stock with a live sports niche that was also going to have an integrated sportsbook.
In this bear market, the idea of owning a pure-play streaming stock doesn’t hold much appeal to me. The same goes, for now, with pure-play sports betting stocks. But the combination of the two together gave FuboTV a unique selling proposition that I believed could set it apart in a crowded field.
But in early fall, FuboTV announced that they were abandoning the sportsbook, for now. In that instant, I had to question my reason for owning the stock, and I sold. And it seems other investors have had the same idea. FUBO stock is down over 37% in the last three months and over 80% in the last 12 months. One reason may be that the company’s revenue, which had been rising steadily, fell off in the last quarter even as many investors believed it would get a boost from interest in the World Cup.
About FuboTV
fuboTV Inc operates a live TV streaming platform for live sports, news, and entertainment content in the United States and internationally. The company's platform allows customers to access content through streaming devices, as well as on SmartTVs, mobile phones, tablets, and computers. fuboTV Inc was incorporated in 2009 and is headquartered in New York, New York.
- Current Price
- $1.44
- Consensus Rating
- Hold
- Ratings Breakdown
- 3 Buy Ratings, 4 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $2.88 (100.0% Upside)
#2 - DocuSign, Inc. (NASDAQ:DOCU)
DocuSign, Inc. (NASDAQ:DOCU) was unquestionably a winning stock during the pandemic. The company that is known for remote, electronic signatures added subscribers at a healthy clip as business couldn’t be conducted in person. Investors who owned DOCU stock at the onset of the pandemic were rewarded with an impressive gain of over 290%.
But the stock has lost all of those gains and then some. The issue is that growth is slowing. DocuSign is projecting 18% revenue growth for the year. That is putting the company in an unenviable position of seeing revenue increasing, but earnings per share falling. And those losses are widening.
The new CEO is already enacting cost-cutting measures. And as long as subscribers don’t leave the platform, there may be an opportunity for DocuSign to recover at some point. But with a hefty debt-to-equity ratio that the company has to manage in the face of higher interest rates, that recovery may be delayed.
About DocuSign
DocuSign, Inc provides electronic signature solution in the United States and internationally. The company provides e-signature solution that enables sending and signing of agreements on various devices; Contract Lifecycle Management (CLM), which automates workflows across the entire agreement process; Document Generation streamlines the process of generating new, custom agreements; and Gen for Salesforce, which allows sales representatives to automatically generate agreements with a few clicks from within Salesforce.
Read More - Current Price
- $78.81
- Consensus Rating
- Hold
- Ratings Breakdown
- 2 Buy Ratings, 7 Hold Ratings, 2 Sell Ratings.
- Consensus Price Target
- $63.40 (19.6% Downside)
#3 - Carvana Co. (NYSE:CVNA)
Carvana Co. (NYSE:CVNA) was another pandemic winner. The company’s digital-only format for buying and selling cars turned from disruption to essential service in 2020. That combined with consumers being flooded with stimulus, low interest rates, and used car prices at all-time highs gave Carvana all the ingredients it needed to be a winning stock.
But those tailwinds have turned to headwinds, and Carvana now finds itself facing a perfect storm that is pushing the company to the brink of bankruptcy. Used car prices are falling but rising interest rates are likely to keep consumers out of the market.
That has created a situation where Carvana has $316 million in cash and cash equivalents against $6.6 billion in long-term debt. The company has some options, but it amounts to selecting the least bad one and having the time to execute it.
It may be tempting to swoop in on CVNA stock hoping that the worst is behind it. But hope isn’t a strategy and until Carvana reveals what its strategy is, it’s a stock to avoid.
About Carvana
Carvana Co, together with its subsidiaries, operates an e-commerce platform for buying and selling used cars in the United States. Its platform allows customers to research and identify a vehicle; inspect it using company's 360-degree vehicle imaging technology; obtain financing and warranty coverage; purchase the vehicle; and schedule delivery or pick-up from their desktop or mobile devices.
Read More - Current Price
- $244.38
- Consensus Rating
- Hold
- Ratings Breakdown
- 8 Buy Ratings, 11 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $217.71 (10.9% Downside)
#4 - Vroom, Inc. (NASDAQ:VRM)
I don’t want to continue to bang on the digital automobile sellers, but Vroom, Inc. (NASDAQ:VRM) presents many of the same issues that I mentioned with Carvana.
Vroom went public in 2020. That timing looked to be smart as the pandemic stirred demand for a contactless way for individuals to buy and sell vehicles. And VRM stock soared to over $65 a share shortly after going public.
However, almost immediately the company’s fortunes started to turn. In 2022, the stock is down over 90% and is trading for just over $1 per share. Vroom lagged behind competitors such as Carvana in the good times, and it has to find a way to stand out in a difficult market.
One opportunity may come from its acquisition of automotive lender United Auto Credit Corporation (UACC). And the company plans to expand into the area of non-prime financing in 2023. That may be necessary for some consumers, but it’s also adds an element of risk to what is already a risky business model.
About Vroom
Vroom, Inc operates as an automotive finance company. The company offers vehicle financing to its customers through third party dealers under the UACC brand. It also provides artificial intelligence powered analytics and digital services to dealers, automotive financial services companies, and others in the automotive industry for automotive retail.
Read More - Current Price
- $5.51
- Consensus Rating
- N/A
- Ratings Breakdown
- 0 Buy Ratings, 0 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- N/A
#5 - Stitch Fix, Inc. (NASDAQ:SFIX)
Stitch Fix, Inc. (NASDAQ:SFIX) presents investors with another example of why having a digital-only business model is not sufficient by itself.
Stitch Fix offers a curated shopping experience. Customers fill out an online profile and do a “style shuffle” so a stylist gets a sense of what clothing items may appeal to you. For a $20 fee, customers receive their “fix” of five items in the mail. They can keep (and buy) what they want and return the rest at no cost.
The company appeared to have a growth opportunity as the nation came out of the pandemic. With people “getting out” again, they would need to freshen up their wardrobe. And Stitch Fix was a chance to do that in a contactless way.
But competition and a muted return to work are just two of the obstacles working against the company. Revenue did climb but now is falling back. And while it’s still above pre-pandemic levels, it won’t be for long on its current trajectory.
About Stitch Fix
Stitch Fix, Inc sells a range of apparel, shoes, and accessories for men, women, and kids through its website and mobile application in the United States and the United Kingdom. It offers denim, dresses, blouses, skirts, shoes, jewelry, and handbags under the Stitch Fix brand. The company was formerly known as rack habit inc.
Read More - Current Price
- $3.88
- Consensus Rating
- Reduce
- Ratings Breakdown
- 0 Buy Ratings, 9 Hold Ratings, 2 Sell Ratings.
- Consensus Price Target
- $3.27 (15.8% Downside)
#6 - Rocket Companies, Inc. (NYSE:RKT)
I’ll admit that Rocket Companies, Inc. (NYSE:RKT) could be listed as a sneaky buy. Strictly from a technical standpoint, RKT stock is butting up against its 200-day simple moving average. And if it can push past that there could be some upside ahead.
Your belief in that happening will depend largely on where you feel the economy is at. If we’re close to the bottom, then bulls would argue that the worst is priced into the stock. That may be the sentiment of company insiders who have been buying the stock in the last month.
There’s an increasingly loud chorus, however, that is suggesting the worst may be yet to come. If that’s true. then the housing market is not likely pick up at a rate that would suggest a significant rise in revenue and earnings for Rocket Companies.
Rocket Companies debuted in 2020 at a time that was such a historical outlier for the mortgage industry that it’s hard to forecast what the stock will look like in a more traditional housing boom. That’s reason enough to stay away from RKT stock.
About Rocket Companies
Rocket Companies, Inc, a fintech holding company, provides mortgage lending, title and settlement services, and other financial technology services in the United States and Canada. It operates through two segments, Direct to Consumer and Partner Network. The company's solutions include Rocket Mortgage, a mortgage lender; Amrock that provides title insurance, property valuation, and settlement services; Rocket Homes, a home search platform and real estate agent referral network, which offers technology-enabled services to support the home buying and selling experience; and Rocket Loans, an online-based personal loans business.
Read More - Current Price
- $13.68
- Consensus Rating
- Reduce
- Ratings Breakdown
- 0 Buy Ratings, 7 Hold Ratings, 5 Sell Ratings.
- Consensus Price Target
- $15.13 (10.6% Upside)
#7 - Beyond Meat, Inc. (NASDAQ:BYND)
The plant-based food trend is real and likely to grow in the coming decade. So please don’t mistake this critique of Beyond Meat, Inc. (NASDAQ:BYND) as being a hatchet job for the concept.
The reason to avoid BYND stock at this time is a matter of economics. Simply put, the company’s products may appeal to a niche market, but that market is not growing.
There was optimism as inflation priced beef off of the shopping lists of many middle-income Americans. This potentially took away one of the obstacles that Beyond Meat faced. That is, consumers had to pay a premium to give the product a try. So when consumers were “trading down” with regard to their proteins, some thought it opened a window.
That’s not the case as Beyond Meat finds itself cutting prices to incentivize sales. BYND stock is down 77% for the year and while it may have bottomed, there doesn’t appear to be much upside to owning the stock at this time.
About Beyond Meat
Beyond Meat, Inc, a plant-based meat company, develops, manufactures, markets, and sells plant-based meat products in the United States and internationally. The company sells a range of plant-based meat products across the platforms of beef, pork, and poultry. It sells its products through grocery, mass merchandiser, club stores, and natural retailer channels, as well as various food-away-from-home channels, including restaurants, foodservice outlets, and schools.
Read More - Current Price
- $5.15
- Consensus Rating
- Reduce
- Ratings Breakdown
- 0 Buy Ratings, 3 Hold Ratings, 3 Sell Ratings.
- Consensus Price Target
- $5.50 (6.8% Upside)
Selling stocks is not easy if you look at selling as “failing" at investing. But that should not be the way you think about it. Even a legendary “buy and hold" investor like Warren Buffett sells stocks every now and then. And when he does, he'll usually be clear that the reason he bought the stock in the first place no longer exists.
Selling doesn't mean saying goodbye to a stock forever. In some cases, it just means that it's time to let it go for now. When the market is in a correction mode, it's no time to play hero ball. This is a time to be highly selective. And that means sticking to stocks with a proven track record.
Every investor wants to find the next Amazon, Inc. (NASDAQ:AMZN) or Apple Inc. (NASDAQ:AAPL) when they were selling for under $10. But those are hard to find, and most investors should only reserve a small fraction of their portfolio for such stocks.
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