There are winners and losers in every type of market. While the share prices of some companies soar, others plunge. This can be due to a number of factors, ranging from earnings misses and weak forward guidance to fraud, mismanagement, bankruptcy and public criticism. Whatever the reason, there are many stocks that investors should avoid at all costs. Even many once-dominant companies whose stocks were rock stars years ago may have now fallen on hard times, requiring investors to sell them to stem losses. The good news is that subpar stocks are often easy to spot and can be avoided. The bad news is that often the shareholders of plunging stocks are reluctant to sell them because they don’t want to take losses. But trust me when I say that losses often get worse over time rather than better. Here are three stocks to get out of now because their share prices are poised to plunge even more than they already have.
How about a stock that has already plunged because it may go out of business? That’s the case with Tupperware (NYSE:TUP), the iconic food storage company that just warned of a potential bankruptcy filing. TUP stock fell more than 50% and hit a new, all-time low on the announcement that it had hired financial advisors to explore options to help “remediate its doubts regarding its ability to continue as a going concern.” Tupperware’s share price has now fallen 93% in the past 12 months.
In business for more than 75 years, Tupperware has struggled with rising competition and an outdated, direct-to-consumer business model for its sealable and reusable plastic food-storage containers.
Despite the entire world moving online, Tupperware continues to earn most of its revenue from independent sales representatives who sell its products door-to-door. To say the company’s business model has been challenged by online shopping is an understatement. Tupperware reported that it is struggling under a debt load of $705 million at a time when its market capitalization is only about $70 million.
Sell TUP stock now!
Even its status as a meme stock may not be enough to save troubled Canadian technology firm BlackBerry (NYSE:BB), which continues to struggle a decade after getting out of the smartphone game. The company just reported a net loss of $495 million for its fiscal fourth quarter, down from a profit of $144 million a year earlier. Its Q4 earnings per share amounted to -85 cents, down from a loss of 3 cents per share a year earlier. For all of last year, BlackBerry posted a loss of $734 million, down from a $12 million profit in 2021.
Despite periodically getting squeezed higher due to its status as a meme stock, BlackBerry’s share price continues to trend lower. In the past year, BB stock has fallen 36%.
Over five years, the company’s shares are down nearly 60%. Its efforts to pivot into Internet of Things (IoT) technologies andsoftware for self-driving vehicles hasn’t gained the traction that the company and its shareholders have been hoping for, leaving BlackBerry a shade of its former self.
The latest challenge for financial technology (fintech) firm Block (NYSE:SQ) is an activist short-seller report from short seller Hindenburg Research that accuses the company of falsely inflating the user numbers of its Cash App and taking a “Wild West” approach to its compliance and internal control systems.
Hindenburg’s report also claims that Block engages in “criminal activity” and that “fraud,” including misreporting of financial statements. is “rampant on its platform,” SQ stock plunged 15% immediately after the report was published.
Block, formerly known as Square, has responded to the Hindenburg report by saying that it is considering taking legal action against the short seller. Unfortunately, the threat of legal action has done little to help SQ stock, which is down nearly 50% in the last 12 months. The stock has fallen nearly 20% since the report was made public.
This is just the latest in a series of blows to Block, which has struggled with rising competition in the fintech space and a plunge in the value of cryptocurrencies last year.
On the date of publication, Joel Baglole did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.