Broad markets are at all-time highs, but not every stock has joined in the fun. Major industries such as energy and retail — even with the latter group posting a nice rally at the end of 2017 — are struggling. Outside those sectors, other companies have tumbled due to execution issues or competitive problems, making them stocks to sell in 2018.
Even in a hugely bullish market, there are laggards. In some cases, those laggards offer value, as seen in the 10 2017 losers that look like stocks to buy in 2018. But for these eight stocks, recent weakness is a sign of just how desperate the situation is — and will be this year.
After all, if a stock can’t rise in a market this positive, there’s only two possibilities. Either investors simply aren’t paying attention, or the problems facing the stock are so severe that they can’t be papered over even with macro growth and a bullish market.
These eight stocks stock to sell all fall in the latter group, and they’re all likely to reach new depths in 2018:
Stocks to Sell: Avon Products (AVP)
All-Time Low: $1.62 (split-adjusted), October 27, 1989
The world simply has moved away from Avon Products, Inc. (NYSE:AVP). The “Avon lady” that drove the U.S. business seems a relic of the past, and Avon already has sold that business to private equity firm Cerberus Capital Management. The plan was to focus on faster-growing and more profitable segments overseas, but that plan, too, has hit a wall.
Revenues are declining, the number of Avon representatives is falling and margins are compressing. AVP stock declined 57% in 2017 and it doesn’t look like the bleeding is done. Massive layoffs were part of an aggressive cost-cutting plan, but cash flow remains negative and Avon’s ~$750 million in net debt is nearly as large as its $972 million market capitalization.
AVP stock has bounced a bit after hitting a 28-year low below $2 back in November. But that bounce seems likely to be short-lived. There’s little reason to see any growth here, and the debt load alone looks like enough to sink AVP. A 28% decline this year — half of 2017’s fall — will be enough to send AVP to a new all-time low. And while that sounds like a big move, in the context of the stock’s recent movements it’s just a continuation of the trend.
At the moment, $1.61 seems likely this year — and zero seems reasonably assured at some point in the not-too-distant future.
Stocks to Sell: Barnes & Noble (BKS)
All-Time Low: $4.77 (split- and spin-adjusted), May 11, 1994
Barnes & Noble, Inc. (NYSE:BKS) increasingly looks like another relic of the past. The company’s bookstores have been decimated by competition from Amazon.com, Inc. (NASDAQ:AMZN), and the general move of information from print to online. At $5.35, even considering the 2015 spin-off of Barnes & Noble Education Inc (NYSE:BNED), and a 1997 stock split, BKS now trades just 12% above its adjusted all-time low reached nearly 24 years ago.
To be fair, BKS shareholders have benefited from $1.65-per-share in dividend payments since 2015. The problem for BKS stock, however, is that the dividend is the only thing supporting the stock — and it’s not enough. BKS fell 14% earlier this month after disclosing that holiday sales fell 6.4% on a comparable-store basis. Book sales actually are outperforming; Barnes & Noble’s CD and DVD business are simply collapsing.
Meanwhile, the company has $242 million in debt, and over $1 billion in operating lease obligations (as of the end of FY17). Here, too, a zero seems likely at some point; the only question is how much cash equity investors can pull out in dividends before the end comes.
That’s not much of a bull case, however. With BKS already down 21% this year, the extra 12% needed to set an all-time low seems something close to a certainty.
Stocks to Sell: Synergy Pharmaceuticals (SGYP)
All-Time Low: $1.53 (opening price on OTCBB), November 19, 2008
Synergy Pharmaceuticals Inc (NASDAQ:SGYP) first started trading on the pink sheets back in 2008 at $1.53-per-share. The stock would clear $20 within two years — and since then, SGYP has been nothing but trouble.
Short-sellers are circling the stock: over 30% of the float now is sold short. Oppenheimer downgraded SGYP earlier this month, citing the likely need for another dilutive share offering to raise cash. Five days later, Chris Lau on this site detailed the many challenges facing SGYP.
To be fair, Lau argued SGYP might be due for a bounce. Its main drug, Truvance, is used to treat CIC (chronic idiopathic constipation) and it is seeing sharp growth in prescriptions. Synergy continues to burn cash — the key reason Oppenheimer is worried about further dilution — but could stabilize that burn and turn the corner if Truvance gains traction. And with the stock still roughly 50% above its initial price, it would take a roughly one-third decline to reach a new low.
That low still seems possible, if not outright likely, in 2018. Short-sellers in the pharmaceutical space tend to be attuned to prescription growth and market movements, and they clearly see little risk in betting against SGYP even after a long decline. The cash burn is going to drive another offering at some point, even if it doesn’t come as quick as Oppenheimer forecasts, and that offering likely will drive SGYP lower.
It increasingly looks like SGYP’s only way out is to sell itself to a larger company with a larger, better sales force. But acquirers hardly are motivated to buy Synergy at the moment, with bankruptcy risk reasonably significant. To avoid breaking $2 and hitting all-time lows, Synergy needs a turnaround. But there just isn’t enough to see that turnaround coming any time soon.
Stocks to Sell: DBV Technologies (DBVT)
All-Time Low: $20.26, March 13, 2015
French biopharmaceutical company DBV Technologies SA – ADR (NASDAQ:DBVT) has had some troubles of its own of late. The company’s peanut allergy drug posted disappointing Phase 3 data in October; DBVT shares fell 41% as a result.
Since then, trading has been choppy. DBVT just missed a new all-time low back in December, but managed to rally; it’s now again heading in the wrong direction, dipping back below $25.
There’s good reason to see the stock hitting the teens at some point this year. DBV is in a head-to-head race with Aimmune Therapeutics Inc (NASDAQ:AIMT) in commercializing an allergy preventative — and the October data appears to show that it has fallen behind. Updated results show that DBV should have some role to play in the market, but it doesn’t look like enough to support what still is a $600 million-plus market cap.
It’s not a coincidence that AIMT shares soared on DBVT’s disappointment. Essentially, the two companies are playing a zero-sum game. Without better data, DBVT is likely to retest last year’s lows, and eventually its 2015 lows as well.
Stocks to Sell: Benefitfocus (BNFT)
All-Time Low: $19.58, February 12, 2015
Benefitfocus Inc (NASDAQ:BNFT) has an interesting business model. The company offers software that helps insurers and employers manage benefits, most notably healthcare coverage.
Investors initially liked the story here: BNFT cleared $75 in early 2014, just months after its IPO. Since then, however, execution issues and decelerating growth have kept a lid on the stock.
It seems likely to get worse before it gets better. Benefitfocus hired three CFOs in a span of less than a year, and replaced its CEO in November. The company has focused on its employer business, but now carrier revenue actually is declining. Overall sales grew in the single-digits in Q3, yet BNFT still trades at nearly 40x Adjusted EBITDA, and remains unprofitable on a GAAP basis.
It’s a tough combination, and a 20%+ decline this year would send BNFT to an all-time low. With nearly 20% of the float sold short, and BNFT down 29% just in the last six months, the likelihood of such as steep decline seems rather high.
Stocks to Sell: GenMark Diagnostics (GNMK)
All-Time Low: $3.62, March 15, 2011
Molecular diagnostics company GenMark Diagnostics, Inc (NASDAQ:GNMK) has stabilized after an ugly 2017. GNMK stock fell by more than two-thirds in a matter of months, with an ugly Q3 report in November sending the stock down 41%.
The relative quiet may not last. GenMark has launched its ePlex testing system — but placements have been a bit slower than expected. And that disappointment comes after the product already had been two years later to market than originally projected.
With GenMark so significantly reliant on the next-generation ePlex to drive future growth, 2018 will be a key year. If the company can begin to drive investor confidence in the product and in the company’s growth potential, there’s room for the stock to rebound quickly. But GenMark has shown little to support that confidence, and if the recent status quo holds a new all-time low will be hit soon, and likely this year.
Stocks to Sell: NanoString Technologies (NSTG)
All-Time Low: $7.01, August 12, 2013
Another molecular diagnostics play, NanoString Technologies Inc (NASDAQ:NSTG) has a story that sounds awfully similar to that of GenMark. Growth opportunities drove the stock higher; an ugly third-quarter report pulled it down.
In NSTG’s case, preliminary Q3 revenue numbers pulled the stock down 28%. The decline would reach over 50% in a matter of weeks before a recent, modest rally. Here, too, execution needs to improve; the core nCounter Analysis System seems to be a better product in theory than in the market.
NSTG still has time to turn it around, and it’s making some progress. Revenue should increase over 30% in 2017, and the company still has over $80 million in cash and investments on the books. But big losses mean NanoString is burning a good chunk of that cash, and until that stops, the decline in NSTG likely won’t come to an end.
Stocks to Sell: Ascent Capital Group (ASCMA)
All-Time Low: $7.77, February 11, 2016
Ascent Capital Group Inc (NASDAQ:ASCMA) owns MONI (formerly Monitronics), a home security provider. In theory, home security monitoring seems like a stable business with excellent free cash flow — one reason Ascent levered up to buy businesses and customers earlier this decade.
That strategy worked for a while, as ASCMA stock neared $90 toward the end of 2013. But as with so many ‘roll-ups’ — think Valeant Pharmaceuticals Intl Inc (NYSE:VRX) or Platform Specialty Products Corp (NYSE:PAH) — the strategy only worked until it didn’t. With Ascent carrying over $1 billion in debt, the change in sentiment meant a huge reversal in ASCMA shares.
It could, and should, get worse. Ascent’s debt load looks crippling, to the point that ASCMA very well could be a zero at some point in the future. Subscriber attrition rates are rising. Myriad startups are offering cheaper, do-it-yourself, security options and telecom providers like Comcast Corporation (NASDAQ:CMCSA) and AT&T Inc. (NYSE:T) are targeting the space as well.
As a result, Ascent is an extremely tough spot and ASCMA stock seems likely to see more downside in 2018. The 2016 buyout of ADT by Apollo Global Management LLC (NYSE:APO) raised hopes that Ascent might catch a bid itself, but those hopes are fading as ADT is set for another IPO.
Debt problems aren’t going away; growth isn’t returning; and a buyout seems unlikely. The combination means ASCMA likely is headed for a new low in 2018.
As of this writing, Vince Martin did not hold a position in any of the aforementioned securities.