The end of the year is a great time to re-balance your portfolio. Out with the old and in with the new, as the saying goes. And this can be true of stocks. Investors should take some time during the holidays to review their holdings and decide which stocks, bonds, exchange-traded funds (ETFS) and other holdings in their portfolio are are performing well and which ones are lagging behind. Many view the laggards as the stocks to sell. However, it’s not always that simple.
It’s also worth looking ahead to 2021 to decide which stocks might continue to falter. That way you can establish a group of stocks to avoid as we enter a New Year. This is particularly important with a novel coronavirus vaccine in the mix. Many stocks that performed well this past year may not do so well as we turn the page on 2020.
With that in mind, here are seven stocks to sell by Dec. 31, the last calendar day of the year:
- Netflix (NASDAQ:NFLX)
- Zoom (NASDAQ:ZM)
- Shopify (NYSE:SHOP)
- Facebook (NASDAQ:FB)
- Campbell Soup (NYSE:CPB)
- Gamestop (NYSE:GME)
- Nikola (NASDAQ:NKLA)
Stocks to Sell By December 31: Netflix (NFLX)
Sure, you might binge watch Netflix during the holidays. But then what? The original streaming service is facing growing competition and, in many ways, has become a victim of its own success — struggling to sustain the momentum it experienced in 2020 during the global pandemic when people all over the world were hunkered down and sheltering in place.
In its most recent third quarter results, Netflix reported that it had signed up 2.2 million new customers, sharply missing analyst expectations of 3.3 million new customers for the quarter. More than 10 million subscribers joined Netflix during the second quarter, and nearly 16 million paying users were signed up during the first.
The company also provided soft guidance for the current fourth quarter, stating that it sees paid net new subscribers of 6 million, missing estimates for an increase of more than 6.5 million. The result was also well below 2019’s final-quarter net new additions of 8.8 million. Not good. The quarterly miss and disappointing guidance has rocked NFLX stock in recent weeks.
Since mid-October, Netflix’s share price has fallen 10% and now trades at right around $500. Many analysts have turned bearish on the stock and expect things to worsen as Covid-19 fades and people emerge from pandemic lock downs around the the globe. It’s time to consider Netflix among the stocks to sell before 2021.
Speaking of tech companies that have run as far as they can during the pandemic and face growing competition, how about video conference company Zoom? Investors who hold ZM stock were certainly rewarded in 2020 as the share price ran up 745% to a peak of $588.84.
But things just haven’t been the same since the clinical trial results for Covid-19 vaccines began to be announced by pharmaceutical companies Pfizer (NYSE:PFE) and Moderna (NASDAQ:MRNA). As countries ranging from the United Kingdom to Canada have approved Covid-19 vaccines, Zoom’s share price has sunk, falling 32% to its current level of $397.96.
Can ZM stock recover as people get vaccinated and head back to the office? Analysts aren’t so sure. Compounding the problems for the company is rising competition from numerous other video conference platforms, from Microsoft (NASDAQ:MSFT) Teams to GoToMeeting and many more platforms and apps.
Given the current situation, Zoom seems to be a company that rose to the occasion during the Covid-19 pandemic, but is destined to be a much smaller concern in a post-pandemic world. Analysts now seem to be falling over themselves to downgrade the stock heading into the New Year. Investors should get out while they can — especially people who bought shares at their peak.
Another company that made a lot of hay while the sun shone in 2020 is Canadian e-commerce platform Shopify. The tech darling of America’s northern neighbor saw its share price climb 231% since the pandemic took hold around the world in March. SHOP stock now tops more than $1,000 per share. The company, whose platform enables retailers to migrate and run their business online, was primed for success as in-person store visits became outlawed in many jurisdictions. However, now many analysts see SHOP stock as overvalued and ripe for a correction.
Shopify doesn’t just have the end of the Covid-19 crisis to worry about. E-commerce giants such as Amazon (NASDAQ:AMZN), eBay (NASDAQ:EBAY) and Walmart (NYSE:WMT) have also been pushing for e-commerce growth, and new competitors are entering the space all the time.
An announcement this past summer that merchants have been downgrading to lower-priced plans or altogether cancelling subscriptions alarmed many analysts, who wonder how long retailers will stick with Shopify. Customer loyalty has been called into question. SHOP stock is down 7% from its 52-week high at $1,067.37 a share. It could be the start of a slide.
Social media giant Facebook is dealing with problems that have nothing to do with the pandemic. Namely, the Federal Trade Commission and a coalition of attorneys general from 48 states have filed antitrust lawsuits against Facebook, accusing the company of anti-competitive practices and trying to stifle competition. The lawsuits could require Facebook to divest two of its biggest and most significant acquisitions: the social media apps Instagram and WhatsApp — effectively breaking-up the company.
The antitrust case comes just as Facebook was trying to rehabilitate its image after the November presidential election. During campaign, Facebook was accused of being used by foreign entities and other bad actors to spread misleading and false information to American voters. The company faced similar charges in the 2016 presidential election.
The pressure this year was enough that Facebook Chief Executive Officer Mark Zuckerberg announced that the social media platform would not run any political ads on its site in the seven days prior to the U.S. election on Nov. 3. Still, Facebook’s reputation has taken a hit and the latest government attack further cements the companies image as the poster child for big, bad tech.
FB stock peaked at $304.67 a share in early September and has since fallen nearly 10% to its current level of $277.12 a share.
Campbell Soup (CPB)
Are we going to continue stockpiling can of Campbell’s soup as the Covid-19 vaccine becomes widely available? Not likely. As the pandemic retreats, the days of hoarding cans of soup like we’re preparing for the apocalypse will no doubt come to an end. And with it, the end of the improbable run in CPB stock — which has enjoyed a banner year in 2020 — will end.
The Campbell Soup Company, which was started back in 1869, and today sells crackers, salsa, spaghetti sauce and tomato juice in addition to its signature line of soups, enjoyed a resurgence during the Covid-19 pandemic as people bought its products in droves and ate lunch at home each day rather than brown bagging it at the office.
In the fiscal first quarter of 2021, Campbell Soup reported a 7% increase in net sales to $ 2.34 billion. The sales growth has helped CPB stock run up 39% in 2020 to a 52-week high of $57.54. However, the company’s stock fell after it gave weak guidance for the fiscal second quarter.
Campbell Soup forecast second-quarter sales growth of 5% to 7%, and adjusted earnings per share of 81 cents to 83 cents. The consensus of analysts had been for sales growth of 6.5%, and earnings per share of 84 cents. The guidance should be taken as a sign of things to come for the company and stock. As such, it’s one of the key stocks to sell now.
Gamestop is another retailer whose best days may now be behind it. If you haven’t already added it to your list of stocks to sell, now’s the time.
The video game and consumer electronics retailer based in Texas saw its stock fall more than 20% on Dec. 9 after it missed third-quarter sales estimates and announced plans to sell up to $100 million in stock. The company announced that its “[s]ales fell 30% to $1 billion in the period ended Oct. 31.” On the other hand, analysts had forecast sales of $1.09 billion. Proceeds from the stock sale, which didn’t impress investors, will be used to fund new-product efforts and build the company’s e-commerce presence as video games increasingly move online.
To that end, GameStop also announced that it will continue to close its brick-and-mortar stores in 2021 and focus more on online operations. The company shuttered almost 700 stores in 2020 and plans to close more locations in 2021 and 2022. The executive team says it will rely on cost cutting and expansion into PC gaming to drive a long hoped for a turnaround.
However, many analysts are saying its too little, too late for Gamestop and are slapping “sell” ratings on GME stock. The median price target of $10 a share that analysts have on the stock represents a nearly 30% decline from the current stock price of $14.12.
It has been a touch autumn for electric car maker Nikola and its shareholders. Accused of fraud by a financial research firm, charges of sexual abuse levelled against company founder Trevor Milton and an investigation by the Department of Justice led to General Motors (NYSE:GM) to drop its equity stake in the start-up as well as end plans to build Nikola’s electric pickup truck known as “the Badger.” Not good.
All the negative news and publicity managed to send NKLA stock sharply lower in recent months. In fact the share price fell 89% from a peak of $93.99 a share to $10.27. While it has since rebounded a bit, the stock is now trading hands at $18.57 per share.
Where Nikola goes from here is the million dollar question facing investors. While General Motors is continuing on with an agreement to work with Nikola on fuel cells needed to operate electric vehicles, it is a fraction of the original deal the two automakers had in the works before all the negative news hit Nikola. While some investors and analysts are looking for signs that NKLA stock has hit bottom and is ready to bounce higher, it is worth noting that the company has yet to manufacture any vehicles.
The Badger truck isn’t expected to enter production until late 2022 at the earliest, although that timing may now be in doubt. Nikola currently has limited revenue and remains unprofitable. Investors should consider this one of their stocks to sell now before things get any worse.
On the date of publication, Joel Baglole held a long positions in FB, MSFT and MRNA.
Joel Baglole has been a business journalist for 20 years. He spent five years as a staff reporter at The Wall Street Journal, and has also written for The Washington Post and Toronto Star newspapers, as well as financial websites such as The Motley Fool and Investopedia.