Tech stocks have the potential to deliver spectacular returns. Even older companies that fall to the wayside can release a new product that turns out to be a game changer. Investors won’t easily forget about about the once-struggling PC maker that went on to release the iPod and iPhone — becoming America’s first $2 trillion public company.
However, for every Yin there is a Yang. Actually, there are many — tech companies that may have held promise, but now seem destined to fade. Failure or mediocrity is far more common than explosive growth.
Here are 7 tech stocks that are fast approaching their sell-by date:
- Cars.com (NYSE:CARS)
- Fangdd Network Group (NASDAQ:DUO)
- National Instruments (NASDAQ:NATI)
- New Relic (NYSE:NEWR)
- Sabre (NYSE:SABR)
- WEX (NYSE:WEX)
- Yiren Digital (NYSE:YRD)
If any of these equities are currently in your portfolio, it may be time to think about selling.
Outdated Tech Stocks To Sell: Cars.com (CARS)
There was a time when Cars.com seemed like the future of buying cars. Why go into a dealership and haggle with the sales department when you could buy a car online? And for a short time, investors were convinced this was one of the next big tech stocks.
In two short years, CARS stock grew at a rapid pace, racking up 455% of gains between 2015 and 2017. After closing at a record high $50.53 in October 2017, it’s been all downhill ever since.
It turns out that not everyone is ready to buy their car on the internet. And Cars.com faced growing competition besides. The number of car dealers signed up for its service began to drop, as did advertising and revenue. In 2019, when a potential sale of the company fell through, CARS stock plummeted 34% in one day, dropping its market capitalization from $1.2 billion to $786 million.
Those who held onto their shares are wishing they had dumped them then. With the pandemic further cutting into its business, Cars.com stock is now trading in the $3.60 level with a market capitalization of just over $318 million.
Fangdd Network Group (DUO)
A lot of people have bought into Chinese tech stocks, which makes sense given the size of the market they serve. As China ramps up adoption of various technologies, many of these companies seem poised to take off in value.
A good example of this thought process is Fangdd Network Group, which operates an online real estate marketplace. Given the rising rate of home ownership in China, plus the growing rate of internet access (over 900 million people in that country are now on the web), DUO stock would seem like a win.
But things haven’t turned out that way. A short gain after its November 2019 initial public offering has been followed by an extended slide. In its latest quarter, revenue not only missed estimates, it declined 9% year-over-year, while earnings per share were down 43% YoY. And you can’t really blame the pandemic, because China recovered early from the coronavirus and its real estate market quickly rebounded.
DUO stock now trades at $7.36, and shares are worth less than half what they were at the start of the year. Add in the growing risk of holding Chinese stocks due tightening U.S. stock market regulations, and this “F” rated stock simply isn’t worth the risk of holding onto.
National Instruments (NATI)
Founded in 1976, National Instruments specializes in measurement, automation, and engineering software, along with complementary hardware. The company’s flagship product is its LabVIEW system-design platform.
The company’s annual revenue peaked at $1.359 billion in 2018. Not coincidentally, 2018 also marked the all-time highest close for NATI stock. It hit $52.81 in March of that year.
Since then, it’s been downhill for NATI. It did bounce back from the stock market crash in March, but has yet to recover to January levels. With NATI stock down 30% from its 2018 high and an “F” rating in Portfolio Grader, I’d say now is the time to consider dumping this stock before it falls further.
New Relic (NEWR)
San Fransisco-based New Relic offers SaaS systems for real-time monitoring of the performance of web and mobile applications. Shares in the company saw rapid growth through 2017 and 2018, but the stock has struggled since.
In August, it was revealed that New Relic customers are not signing up for additional services. They aren’t expanding their use of the company’s products, which isn’t a great sign; existing customers that upgrade are much cheaper to obtain than net new clients.
New Relic is trying to counter this with a revamp of its New Relic One platform. However, market reaction to that move — which risks customers leaving rather than transition to a new platform — was not good. NEWR stock was slammed, and JPMorgan analyst Sterling Auty downgraded the stock, citing concerns about the company’s “radical change” strategy.
In its most recent quarter, New Relic whiffed badly on earnings. A year ago, the company delivered earnings per share of 24 cents. Analysts were expecting just two cents per share this year, but the company reported a loss of seven cents per share. That triggered another big loss, this time seeing NEWR stock drop 15% on the day.
Time to think about cutting your losses on this “D-rated” tech stock.
If you were to look at the performance of SABR stock over the past six months, you might be impressed. A gain of nearly 32% since the end of May — not too bad at all.
However, with Sabre you have to look at the bigger picture. And nothing about that bigger picture is pretty. Sabre is known for software and SaaS solutions for the travel industry. The company got its start by creating the world’s first computerized airline reservation system. Sabre describes itself as the “global technology provider to the travel industry.”
Few tech stocks could be in a worse position today than those that rely on the travel industry as customers. From cruise lines, to hotel chains, to airlines, the travel sector has been devastated by the coronavirus pandemic. And even with vaccines on the horizon, any prospect of a real recovery may well be years away.
Reflecting this grim reality, SABR stock remains down 54% from January levels. Given that the stock’s all-time high was five years ago, it seemed to be running out of steam even before the pandemic hit.
SABR earns a “D” rating in Portfolio Grader, and its best years are definitely behind it.
Not all investment analysts would agree with my decision to include WEX in this list. Among the 20 surveyed by the Wall Street Journal, 11 have it rated as a hold. Even with eight analysts giving WEX stock a “Buy” rating, plus one rating it as “Overweight,” the average 12-month price target of $163 has 10% downside.
Why the mixed message on WEX? This is a payment processing and IT company that operates primarily within the fleet fuel cards, health benefits, and travel sectors. All three of these have come under heavy pressure in 2020. Lower fuel prices and reduced travel cut into its fleet revenue, travel has been hammered by the pandemic and coronavirus crowding at hospitals has had an impact on health division revenue as surgeries and elective procedures are cancelled.
After 15 years of solid growth, WEX stock has taken a big hit in 2020, down 28% from its February highs. There’s a possibility that WEX bounces back in the post-pandemic world. But with the lasting ripple effects of the pandemic, any recovery will take time.
At just over $181, WEX is currently trading at 2018 levels. Unless you bought it after that (in which case you may well decide to be patient, ride it out and hope for the best), I would be inclined to sell and move onto a tech stock with a more promising trajectory.
Yiren Digital (YDR)
Like Fangdd Network Group, Yiren Digital is another Chinese online marketplace that seems like a perfect growth investment — on the surface. While Fangdd is focused on real estate, Yiren Digital bills itself as a consumer finance marketplace, connecting borrowers and lenders.
The promise of 1.4 billion people in one of the world’s fastest growing economies looking for financing? That was a story that pushed YDR stock to rapid growth when it went public in the U.S. at the close of 2015. Yiren Digital shares grew 432% in value in under two years. Then reality caught up.
The borrowers that Yiren Digital was marketing to are largely classified as subprime. They were borrowing online because traditional banks wouldn’t touch them. And the Chinese government began to crack down on online lending.
TDR stock began a steep decline in 2017. By the start of 2020 it had dropped 88%. The misery for investors has continued this year, with further loses of 45% so far in 2020. If you own this tech stock, now is time to cut it loose before it’s worthless.
Louis Navellier had an unconventional start, as a grad student who accidentally built a market-beating stock system —with returns rivaling even Warren Buffett. In his latest feat, Louis discovered the “Master Key” to profiting from the biggest tech revolution of this (or any) generation.
On the date of publication, neither Louis Navellier nor the InvestorPlace Research Staff member primarily responsible for this article held (either directly or indirectly) any positions in the securities mentioned in this article.