One question that investors frequently ask is “when do I sell a stock?" That can be tricky to answer when stocks are going up, but it can be just as tricky when stocks are going down. And that's even more the case when it comes to penny stocks.
Many investors who buy penny stocks do so knowing that they're placing a speculative bet. This means they're willing to hold on to the stock even when fundamental and technical trends are working against them. But, depending on your position, there are times when it's best to sell some shares even if you have to take a loss and try again another day.
Penny stocks are typically regarded as stocks that trade below $1 (i.e. for pennies on the dollar). But in recent years, the definition has expanded to include all stocks that trade for less than $5. And that's the definition being used in this special presentation.
We're looking at seven penny stocks that investors should sell now. Each has market forces that suggest the stock price still has room to go down. That means selling today can help you get a better price in the future.
Quick Links
- FuboTV
- Opendoor
- Blue Apron
- Beyond Meat
- Stitch Fix
- Amarin
- Aurora Cannabis
#1 - FuboTV (NYSE:FUBO)
I’ll start this presentation with fuboTV (NYSE:FUBO) because I want to practice what I preach. I entered a position on FUBO earlier this year. I liked the synergy of the company’s streaming service with a live sports focus. However, the streaming model by itself doesn’t excite me. What particularly intrigued me was that fuboTV was looking to have an integrated sportsbook to go along with its streaming service.
That was a unique selling proposition that stood out to a sports fan like me. But fuboTV is walking away from its plans to deliver a sportsbook. That means, at least for now, the company is “just” a streaming company. When your thesis for buying a stock change, it’s probably time to sell. And I did.
The company did report better-than-expected earnings in November 2022. This does seem, however, like a case of better-than-expected not strong growth. And fuboTV is not expected to be profitable anytime soon. Without a new catalyst to change the story, it’s time to switch the channel on FUBO stock.
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
- $1.39
- Consensus Rating
- Hold
- Ratings Breakdown
- 3 Buy Ratings, 4 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $2.88 (107.2% Upside)
#2 - Opendoor (NASDAQ:OPEN)
Timing matters a lot in investing. And so it is that Opendoor (NASDAQ:OPEN) became a publicly traded company in June 2020. The housing market was red hot, and Opendoor rode that wave. The company provides the ability for individuals to buy and sell their homes online. It was a perfect solution in the midst of a pandemic.
The company’s revenue has grown sharply in the last year, and the company has posted two straight profitable quarters. Institutional investors hold an impressive 71% of the stock. The company is also cutting staff in an effort to keep that profit coming in as the market softens.
All of this means there are likely to be better days to come for the company. But someday is not today. OPEN stock is down 88% in 2022. And the combination of a softening housing market and rising interest rates is creating headwinds that, for now, make it time for investors to shut the door.
About Opendoor Technologies
Opendoor Technologies Inc operates a digital platform for residential real estate transactions in the United States. It buys and sells homes. The company's product offerings comprise sell to opendoor product that enables homeowners to sell their home directly to it and resell the home to a home buyer; list with opendoor product that allows customers to list their home on the MLS with opendoor and receive cash offer; and opendoor marketplace product that connects the home seller with an institutional or retail buyer.
Read More - Current Price
- $1.69
- Consensus Rating
- Hold
- Ratings Breakdown
- 1 Buy Ratings, 2 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $2.37 (40.0% Upside)
#3 - Blue Apron (NYSE:APRN)
It wasn’t that long ago that Blue Apron (NYSE:APRN) was trading for over $50 a share. That must seem like an eternity to current shareholders. APRN stock is down 73% for the year.
Blue Apron is a case of a company with a solid idea that suffers from too much competition and, perhaps, too low of a barrier to entry. And that continues to be reflected in the company’s financials.
In the short term, APRN stock will be challenged after the company’s disappointing earnings report in November 2022. Revenue was basically flat, but the company posted a larger loss than expected in terms of earnings.
However, the bigger story that came from that report was that Blue Apron removed its guidance for the year because of
delayed funding from one of its major investors. This is significant because companies such as Blue Apron are not profitable and capital is getting more expensive with rising interest rates.
About Blue Apron
Blue Apron Holdings, Inc operates a direct-to-consumer platform that delivers original recipes with fresh and seasonal ingredients. The company also operates Blue Apron Market, an e-commerce market that provides cooking tools, utensils, pantry items, and other products. In addition, it offers Blue Apron Wine, a direct-to-consumer wine delivery service that sells wines, which can be paired with its meals.
Read More - Current Price
- $12.99
- Consensus Rating
- N/A
- Ratings Breakdown
- 0 Buy Ratings, 0 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- N/A
#4 - Beyond Meat (NASDAQ:BYND)
The movement towards plant-based foods is likely to be an investable story in the next decade. However, that doesn’t necessarily mean that Beyond Meat (NASDAQ:BYND) will benefit from being a pioneer in the space.
The issue isn’t so much revenue, although that is not growing as much as many investors would like. But the company is not profitable, and the forecast is that it won’t be profitable before 2026.
One problem that Beyond Meat faces is that its products are not at cost parity with beef products. And even though inflation has raised the price of ground beef, it isn’t moving customers toward the company’s plant-based alternatives. And the company continues to face compressed margins, which means it doesn’t have any pricing power.
Beyond Meat is hoping that a 19% reduction in staff will be a key ingredient to its plans to be cash-flow positive sometime in 2023. Maybe you can take a bite out of the stock, then.
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
- $3.55
- Consensus Rating
- Reduce
- Ratings Breakdown
- 0 Buy Ratings, 3 Hold Ratings, 3 Sell Ratings.
- Consensus Price Target
- $5.50 (54.9% Upside)
#5 - Stitch Fix (NASDAQ:SFIX)
Stitch Fix (NASDAQ:SFIX) leans into the e-commerce sector by offering a curated experience for customers to freshen their wardrobes. After providing some information about their personal style preferences, customers receive a “fix” of five items of clothing. They keep (and pay for) the items they want and return the rest.
There is an element of bad luck in Stitch Fix’s story. First, the Covid-19 pandemic slowed the company’s growth as many people didn’t feel the need to freshen their wardrobes. The company did get a revenue bump as the economy reopened.
But there are signs that inflation is starting to take its toll. Revenue was down in the last quarter on both a sequential and year-over-year basis. Another problem is that, in an effort to boost revenue, the company introduced its Freestyle service. This allows customers to buy single pieces from the company outside of the full “fixes” they receive. Unfortunately, this is having the effect of cannibalizing the company’s core business.
And Stitch Fix has turned unprofitable. The company has posted negative earnings per share in five of its last six quarters. SFIX stock may be worth a look when the economy turns around, but for right now it’s best to stay away.
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
- $3.79
- Consensus Rating
- Reduce
- Ratings Breakdown
- 0 Buy Ratings, 7 Hold Ratings, 2 Sell Ratings.
- Consensus Price Target
- $3.96 (4.5% Upside)
#6 - Amarin (NASDAQ:AMRN)
Amarin (NASDAQ:AMRN) is a biotechnology company that saw its stock soar with the release of Vascepa, a prescription-only omega-3 fatty acid product that is designed as a supplement to diet for reducing triglyceride levels in adult patients.
Getting a product in the market was a boost to the company’s revenue as well as its stock price. But revenue is slowing. In its most recent quarter, revenue was down 37% year-over-year, and sales have been declining in the last three quarters.
To make the outlook more troublesome, Amarin is not issuing guidance for the full year and a key reason for this is the company is still assessing the effect of generic competition for Vascepa in the United States.
AMRN stock was likely a profitable trade for some investors who got in at the right time. However, with the stock down 61% for the year and no other products on the horizon, it’s okay to pass on AMRN stock.
About Amarin
Amarin Corporation plc, a pharmaceutical company, engages in the development and commercialization of therapeutics for the treatment of cardiovascular diseases in the United States, European countries, Canada, Lebanon, and the United Arab Emirates. The company offers VASCEPA, a prescription-only omega-3 fatty acid product, used as an adjunct to diet for reducing triglyceride levels in adult patients with severe hypertriglyceridemia.
Read More - Current Price
- $0.46
- Consensus Rating
- Buy
- Ratings Breakdown
- 1 Buy Ratings, 0 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- N/A
#7 - Aurora Cannabis (NASDAQ:ACB)
Aurora Cannabis (NYSE:ACB) was one of the shining stars when the cannabis bubble inflated in 2018. But the air went out of that bubble several years ago. And despite more acceptance for medicinal and recreational marijuana, the needle is not likely to move for cannabis stocks until marijuana is decriminalized throughout the United States.
Investors were hopeful that legalization would be a priority of the Biden administration. That hasn’t come to pass. And if the opposition party is successful at claiming one or both houses of Congress, it would appear that cannabis legalization will remain on the shelf.
And that’s not good news for shareholders who own ACB stock. The company’s revenue is declining, and they are moving further away from profitability. At some point, there may be a big story with Aurora Cannabis, but that day seems several years away, which means now is a good time to sell the stock.
About Aurora Cannabis
Aurora Cannabis Inc, together with its subsidiaries, produces, distributes, and sells cannabis and cannabis-derivative products in Canada and internationally. It operates through three segments: Canadian Cannabis, European Cannabis, and Plant Propagation. The company produces, distributes, and sells medical and consumer cannabis products in Canada.
Read More - Current Price
- $4.27
- Consensus Rating
- Buy
- Ratings Breakdown
- 3 Buy Ratings, 0 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- N/A
Investors can, and should, consider selling stocks at any time of year. But the end of the year is a particularly good time to think about selling for tax harvesting purposes. Selling some of your losers can help offset the capital gains you've made from your winners.
This serves as a good reminder. Selling a penny stock, doesn't mean that you have to say goodbye to them forever. But there are times when market conditions dictate that there are better places to invest your capital. Stocks don't announce when they're going to turn from bearish to bullish and vice versa. But sometimes you have to know when to not fight the trend.
Most importantly, investors need to consider their own risk tolerance. Penny stocks can test the nerve of the most seasoned investors. And penny stocks frequently don't receive the same analyst coverage that other stocks receive. This can make it tricky to perform your due diligence.
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