We’re barely through two months of the year, and already 2022 is proving to be a very difficult year for investors. Supercharged inflation, war in Europe, sky-high energy prices, constrained supply chains, a global semiconductor shortage and tightening monetary policy have created a vortex of bad conditions for markets around the world. Stocks to sell seems to be the only vogue option at this moment in time, as growth is hard to come by.
Less than 10 weeks into the year and the S&P 500 and Nasdaq indexes are each in correction territory having fallen more than 10%, and the Dow Jones Industrial Average is right behind them, down 8% year-to-date. Most stocks, with the exception of energy and commodities, are down, with sectors such as technology and auto getting hit particularly hard.
Many stocks that were flying high last summer are now down 60% or more from their highs, with no bottom in sight. In such a difficult environment, and with volatility and uncertainty running rampant, now might be a good time for investors to acknowledge their losing trades (painful as that might be) and hit the sell button before things get any worse. Here are three stocks to sell in March.
Stocks to Sell in March: PayPal (PYPL)
Last July, shares of financial technology and online payments company PayPal were sitting at a 52-week high of $310.16. Since then it’s been all down hill. Over the past six months, PYPL stock has declined 66%, including a 48% drop so far this year. At the current level of under $100 a share, the stock is about 70% below its peak reached last summer. And while the share price has made several attempts at recovery since mid-February, they continue to fall back to $100.
So, what gives? After all, it was less than a year ago that PayPal was being hailed as a leader in the fintech space and praised for pioneering cryptocurrency transactions on its payments platform. Not anymore.
PYPL stock appears to have been brought to heel by its lofty price-to-earnings ratio that stood at 75 last July, compared to the average P/E ratio for technology growth stocks of 25. The steep selloff in PayPal’s shares has brought the company’s P/E ratio down to a more inviting valuation of 23.92. However, being expensive hasn’t been PayPal’s only problem.
The company also issued weak forward guidance when delivering its most recent earnings results, saying it now expects revenue to grow 15% to 17% this year, down from previous guidance of 18% revenue growth. The lowered guidance raised red flags across Wall Street and the share price has been punished ever since.
It isn’t all doom and gloom for PayPal. The company’s P/E ratio is now at its lowest level since the company went public in 2015, and PayPal facilitated $1 trillion worth of payments last year, its most ever. That said, it is likely to be some time before PYPL stock recovers in a meaningful way. As investors continue to rotate out of growth stocks in favor of value and cyclical securities, PayPal looks destined to be left behind over the near-term.
Things have gone from bad to worse to downright terrible for Roku. Shares of the company that makes internet-connected television sets and sells online advertisements have declined 68% over the past six months. So far this year, ROKU stock has fallen 53% to now trade at $106.61 a share, down 78% from a 52-week high of $490.76.
The fall from grace for this once promising tech name has been due to slowing growth, disappointing earnings and weak forward guidance — a witches brew of bad news for any stock. The shares basically fell off a cliff in mid-February after the company’s latest earnings caused Wall Street analysts and investors to write off the San Jose, California-based company.
In its fourth-quarter 2021 print, Roku said that its sales totaled $865 million, which was below the $894 million that analysts had been looking for. Worse, the company guided for year-over-year revenue growth in the current first quarter of 25%, a marked slowdown from 33% annualized revenue growth in Q4.
Investors seemed to spend a split second digesting this news before hitting the “sell” button. The day after Roku’s fourth quarter results were made public, the company’s stock price sank more than 20%. Investors still holding on should stop as ROKU stock is unlikely to turn around until the company demonstrates sustained growth. And how soon is that likely to happen? Exactly.
Stocks to Sell in March: Meta Platforms (FB)
Yes it’s cheap. And yes it can rebound. But, as with the other stocks on this list, how long will it take the company formerly known as Facebook to recover from the sharp selloff in its stock? In the case of Meta Platforms, it’s likely going to take longer than most. The reasons for this are twofold.
First, the company led by Mark Zuckerberg is undergoing a major transformation. Beyond the rebrand from Facebook to Meta, the company is pivoting to focus on developing the “metaverse,” a virtual reality world that is largely theoretical at this point and has its share of skeptics.
Second, Facebook’s online advertising revenue, long the company’s cash cow, is being challenged as never before.
Will Meta Platforms ultimately succeed in creating a metaverse where consumers strap on virtual reality headsets and interact with each other in a digital universe? It’s a toss up. More immediately, the company is struggling with its advertising business model as Apple (NASDAQ:AAPL) and Google parent company Alphabet (NASDAQ:GOOG, GOOGL) make it harder to carry out targeted online advertising.
In its most recent earnings report, Meta announced that its ad revenue declined for the first time in the company’s 18-year history. This helps to explain why FB stock is down 44% year-to-date at under $190 a share. A P/E ratio of 16 isn’t going to do much good while the company’s business model is in turmoil. Meta is a prime example of stocks to sell.
On the date of publication, Joel Baglole held long positions in AAPL and GOOGL. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.