Should you or shouldn’t you? Many investors are wondering if it’s time to take some profit. With so much uncertainty in the market, there can be a temptation to take your profits and run. That may or may not be a good strategy. It’s true there are some speculative stocks that are going up on nothing but faith, trust, and pixie dust. But there are other stocks that may still be good buys despite continuing to grow.
Since the sell-off caused by the novel coronavirus and subsequent locking down of large portions of the economy, the stock market has recovered nearly all of its losses. The Federal Reserve has done its part by pledging to keep interest rates low for as long as it takes. New housing starts are up. Unemployment is coming down. There seems to be a lot of fuel for market bulls.
Still, if you’ve been holding one of the stocks in this presentation, it may be time for you to take some of the profits you’ve made. Many of the stocks in this presentation are being downgraded by analysts. And that means that there is likely to be downward pressure on the stock price.
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- Beyond Meat
- Zoom
- Cloudflare
- Amwell
- GrubHub
- Gannett Media
- Signet Jewelers
#1 - Beyond Meat (NASDAQ:BYND)
Beyond Meat (NASDAQ:BYND) has seen its stock rise as much as 157% in 2020. The manufacturer of plant-based meat products has been a clear pandemic winner. The cost of beef skyrocketed as meat processing plants were shut down due to the virus. This helped the company overcome one of the key obstacles it faces, getting initial trials.
However, it seems that the run is over. BYND stock is down nearly 10% in the last two weeks. And the stock just received a rare double downgrade from Barclays analyst Benjamin Theure, which effectively turned the stock from a buy to a sell.
The stock currently has 9 sell rating and 8 hold ratings to go with only 4 buy ratings. And with a price target of $119.30, analysts believe the stock may fall by over 33% in the next 12 months. At issue is the company’s push into the foodservice space. Analysts are concerned that this sector may not recover as robustly as expected in 2021.
In its last quarter, Beyond Meat reported higher year-over-year (YOY) revenue but shrinking YOY earnings. This pattern of growing revenue with shrinking profits has been a broad concern of analysts.
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)
#2 - Zoom (NASDAQ:ZM)
“Zoom” has become a verb during the pandemic as work, school, and social gatherings have made Zoom Communications (NASDAQ:ZM) an essential service. And the stock shows it. ZM stock is up over 700% for the year. However, the stock now has what Jim Cramer describes as a “nosebleed valuation,” which may be a good signal to avoid turning your gain into a loss.
Analysts seem to agree. The stock has a consensus rating of hold, but its 12-month price target suggests that stock may drop nearly 25%. At the same time, it’s fair to say that you can’t apply a fair valuation to Zoom with a 300% growth forecast. However, analysts are starting to factor in the availability of a vaccine. Even if that takes the better part of 2021 to be widely available, getting the most vulnerable population vaccinated would be a potential headwind on Zoom’s meteoric growth.
Zoom is not going away, and there is still a bullish case to be made. But it could be a good example of where pigs get fat, but hogs get slaughtered. There’s no problem with taking some of these profits now.
About Zoom Video Communications
Zoom Video Communications, Inc provides unified communications platform in the Americas, the Asia Pacific, Europe, the Middle East, and Africa. The company offers Zoom Meetings that offers HD video, voice, chat, and content sharing through mobile devices, desktops, laptops, telephones, and conference room systems; Zoom Phone, an enterprise cloud phone system; and Zoom Chat enables users to share messages, images, audio files, and content in desktop, laptop, tablet, and mobile devices.
Read More - Current Price
- $85.60
- Consensus Rating
- Hold
- Ratings Breakdown
- 9 Buy Ratings, 14 Hold Ratings, 2 Sell Ratings.
- Consensus Price Target
- $87.10 (1.7% Upside)
#3 - Cloudflare (NYSE:NET)
Another tech stock that is looking a little toppy is Cloudflare (NYSE:NET). Cloudflare is making noise because of its network-as-a-service (NaaS) program, Cloudflare One, which offers cloud-based security, performance, and control through a single user interface.
Cloud stocks have been among the largest movers this year, and with good reason. Companies are becoming increasingly remote. And that means access to the cloud is imperative. Cloudflare continues to enjoy a consensus buy rating. However, the price target shows a potential downside of nearly 28% from the stock’s current level at around $58.
The concern seems to be if Cloudflare can continue to record the meteoric growth it’s been enjoying. It had a 77% growth margin in the first quarter of this year. However, if the company’s growth “slows down” to a level around 25x sales, the current consensus price target would be justified. Cloudflare reports earnings in early November, which may give investors a better picture of the company’s growth prospects.
About Cloudflare
Cloudflare, Inc operates as a cloud services provider that delivers a range of services to businesses worldwide. The company provides an integrated cloud-based security solution to secure a range of combination of platforms, including public cloud, private cloud, on-premise, software-as-a-service applications, and IoT devices; and website and application security products comprising web application firewall, bot management, distributed denial of service, API gateways, SSL/TLS encryption, script management, security center, and rate limiting products.
Read More - Current Price
- $112.69
- Consensus Rating
- Hold
- Ratings Breakdown
- 12 Buy Ratings, 12 Hold Ratings, 4 Sell Ratings.
- Consensus Price Target
- $97.81 (13.2% Downside)
#4 - Amwell (NYSE:AMWL)
Telehealth has been another big mover in 2020. There are many good plays in this sector, and Amwell (NYSE: AMWL), formerly known as American Well, has been making some noise in the space. Amwell is similar to Teladoc Health (NYSE: TDOC) in that it is a health-care platform that remotely (via the internet) connects patients with doctors. Right now, the company exists as the lone pure-play in the sector.
AMWL stock went public in mid-September with an IPO price of $18. With a share price of nearly $34 per share, those investors have done quite well. But this may be a case of too far, too fast. The stock has grown nearly 100% before it’s ever had a chance to show investors anything.
One concern is that analysts are all over the map on Amwell stock. While some analysts remain bullish, others are suggesting a large move downward. There’s little doubt that a potential surge in new Covid-19 cases may be a bullish catalyst. But Amwell is one company in a sector that continues to grow. It seems like some prudence is in order.
About American Well
American Well Corporation, an enterprise platform and software company, delivers digitally enabling hybrid care in the United States and internationally. The company offers Converge, a cloud-based platform that enables health providers, payers, and innovators to provide in-person, virtual and automated care; and delivers virtual primary care, post-discharge follow-up, chronic condition management, virtual nursing, e-sitting, on-demand and scheduled virtual visits, specialty consults, automated care, and behavioral health, as well as specialty care programs, including dermatology, musculoskeletal care, second opinion, and cardiometabolic care to patients and members.
Read More - Current Price
- $7.87
- Consensus Rating
- Hold
- Ratings Breakdown
- 0 Buy Ratings, 4 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $12.50 (58.8% Upside)
#5 - GrubHub (NYSE:GRUB)
GrubHub (NYSE:GRUB) has seen its stock price increase 78% in 2020. The online food delivery service has been an essential service not only for consumers but for restaurants who needed a lifeline to their customers.
Analysts are exercising a firm “hold” rating on the stock with 24 out of 29 analysts giving the stock a hold rating. However, three out of the other five analysts give the stock a sell rating. And the stock’s 12-month price target is forecasting a downside of over 35%.
There are two reasons for this. The first is that while GrubHub was, and remains, well-positioned for the global pandemic, it’s not a moat. And there is a lot of competition that is already in the space and not much of an obstacle for other companies to enter.
Plus, call it “Covid fatigue” but analysts are looking to the future and are skeptical that the company’s growth is sustainable in a post-Covid environment. While that may still be a way away, the market tends to be forward-looking, which suggests profit-taking may be the way to go.
About Just Eat Takeaway.com
Just Eat Takeaway.com N.V. operates an online food delivery marketplace. The company focuses on connecting consumers and restaurants through its platforms. It serves in the United Kingdom, Germany, Canada, the Netherlands, Australia, Austria, Belgium, Bulgaria, Denmark, France, Ireland, Israel, Italy, Luxembourg, New Zealand, Norway, Poland, Portugal, Romania, Spain, and Switzerland, as well as through partnerships in Colombia and Brazil.
Read More - Current Price
- $61.05
- Consensus Rating
- N/A
- Ratings Breakdown
- 0 Buy Ratings, 0 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- N/A
#6 - Gannett Media (NYSE:GCI)
Gannett Media (NYSE:GCI) is the owner of USA Today. Like many stocks, shares of GCI dropped dramatically at the onset of the Covid-19 pandemic. But unlike other stocks, the stock hasn’t come back. The issue is advertising, or rather the lack of it. When the company should have been able to flourish from an increase in internet traffic, the company was losing revenue from advertisers.
Despite taking many steps to shore up its balance sheet, the company still finds itself staring at a huge net loss. And even with the stock trading at just $1.50, that appears to be high for analysts. At this time, only one analyst still offers an opinion on GCI stock, and they have the stock as a Sell.
Still, the stock has managed an 85% gain since the onset of the pandemic. Nevertheless, if you’re one of the investors who hopped on board that train, now may be the time to jump off before you find yourself carrying a ticket to nowhere.
About Gannett
Gannett Co, Inc operates as a media and marketing solutions company in the United States. It operates through three segments: Domestic Gannett Media, Newsquest, and Digital Marketing Solutions. The company's print offerings includes home delivery on a subscription basis; single copy; non-daily publications, such as shoppers and niche publications.
Read More - Current Price
- $5.09
- Consensus Rating
- Buy
- Ratings Breakdown
- 1 Buy Ratings, 1 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $5.55 (9.0% Upside)
#7 - Signet Jewelers (NYSE:SIG)
The last stock we’re putting on this list is Signet Jewelers (NYSE:SIG). The world’s largest retailer of diamond jewelry has been a surprisingly strong performer. It’s up 25% for the year and over 300% since the onset of the Covid-19 pandemic.
The big problem for Signet is that it relies heavily on its brick-and-mortar presence in malls. And we don’t have to emphasize what a troublesome area that is. Of the five analysts that cover the stock, four give it a sell rating. And the consensus price target of $13.75 means the stock could drop over 40% from its current level.
Beyond its brick-and-mortar presence, Signet faces a problem as many couples delay marriages due to Covid-19 restrictions. The company is pushing a “Path to Brilliance” initiative that will assuredly address the company’s weak omnichannel capabilities. But with such a personal purchase, it’s hard to see many people completely going to an e-commerce model.
About Signet Jewelers
Signet Jewelers Limited operates as a diamond jewelry retailer. It operates through three segments: North America, International, and Other. The North America segment operates jewelry stores in jewelry stores in malls, mall-based kiosks, and off-mall locations in the United States and Canada primarily under the Kay Jewelers, Kay Jewelers Outlet, Jared The Galleria Of Jewelry, Jared Vault, Zales Outlet, Zales Jewelers, Diamonds Direct, James Allen, Banter by Piercing Pagoda, and Peoples Jewellers names, as well as operates online through its digital banners, James Allen and Blue Nile.
Read More - Current Price
- $81.14
- Consensus Rating
- Moderate Buy
- Ratings Breakdown
- 3 Buy Ratings, 2 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $109.60 (35.1% Upside)
I don’t want to leave you thinking that taking profits is a market timing strategy. That typically doesn’t work well, even for experienced investors. It’s important to understand that most publicly traded companies aren’t really sweating the presidential election outcome. In fact, in most cases, they feel like you do. That is, they’ll be glad when it’s all over.
The key to making a profit at this time is looking at the bigger picture and seeing if this is a stock that you’ll regret not having sold in six months. I use that timeframe because the election may cause a significant change to our tax policy. Specifically, capital gains rates could be going up. And that makes a decent argument for locking in some of those gains at a lower tax rate before the end of the year.
Warren Buffett is one of the most unapologetic buy-and-hold investors. But even the Oracle of Omaha has engaged in some high profile selling. And if you own one of the stocks in this presentation, it may be time for you to do some selling.
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