As investors prepare for a sustained bull run in 2022, following a rocky 2022, it’s imperative to keep an eye on the market and reevaluate one’s portfolio. This involves the identification of the worst stocks to buy now and steering clear of those with red flags and warning signs.
A lot has changed in the investing environment since the meme stock frenzy in 2021. Many retail investors remain on the hunt for the next short-squeeze opportunity, but pouring money into these unstable companies is proving to be an unsound strategy.
With that said, we turn our focus to stocks with high risk and low reward, highlighting the importance of being proactive amidst market volatility. It’s imperative to learn from the stock market rout last year and make informed decisions to safeguard your financial future.
Worst Stocks to Buy Now: Mullen Automotive (MULN)
Once a promising electric vehicles giant, Mullen Automotive (NASDAQ:MULN) is hanging on the coattails of its creditors. Its eye-catching electric cars and vans received plenty of attention during the pandemic years. However, since then, its stock has lost the entirety of its value on the back of multiple financial headwinds.
Its financials paint a remarkably unattractive picture, as it remains unprofitable and reliant on debt as a short-term fix. Most recently, it secured a $110 million financial lifeline to help stave off bankruptcy concerns for now. Nevertheless, with its massive annual cash burn of over $80 million, the additional funds are unlikely to last long. On top of that, the threat of MULN stock being delisted from NASDAQ is dimming the firm’s prospects. Therefore, it’s perhaps the right time for investors to cut their losses and avoid MULN stock.
As much as we’d like the EV underdog to succeed, it’s tough to foresee a bright future for Mullen Automotive and its stakeholders.
Intel (INTC)
Intel (NASDAQ:INTC) stockholders will have left they’d been thrown under the bus, with the tech giant recently slashing its dividend payout by a staggering 66% to preserve its cash balance. Moreover, with its competition breathing down its proverbial neck, a snap-back seems unlikely at this point. Its primary competitor, Advanced Micro Devices (NASDAQ:AMD) has chomped away at Intel’s once-dominant market share in the chip space, from 82% in 2018 to 62% in 2022, thanks partly to the success of AMD’s Ryzen chips.
Intel’s fundamentals have slowed down dramatically of late, with the situation deteriorating rapidly. Sales in 2022 dropped by a whopping $63.1 billion or 20% on a year-over-year basis, leaving investors with a meager dividend with a relatively low yield. Moreover, despite the company leadership’s efforts to engineer a resurgence amid ongoing reshoring efforts, the prospects are remarkably bleak at this point. For investors, Intel’s underwhelming earnings performance, with its profitability firmly in the red, paints a sordid picture of its future.
Exela Technologies (XELA)
Exela Technologies (NASDAQ:XELA) is a Texas-based business that is one of the top process automation specialists. In reality, the firm is essentially a low-margin call center with a ton of debt. This is evidenced by its unattractive gross margin of just 18.5%, which is almost 38% lower than the sector median.
Perhaps one of the few things going for the business was its single-digit top-line growth over the past five years. However, we have seen a dramatic pullback in its revenue growth in the past year, with sales growth firmly in the negative. Consequently, its debt levels have ballooned over $1.2 billion as it scrambles to cut costs by offloading real estate and reducing its workforce.
Further compounding its troubles is a potential delisting from NASDAQ, which has its shares languishing below $1 per share since August 2022. While a reverse share split is in the works, it fails to address the company’s worrying financial troubles.
On the date of publication, Muslim Farooque 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.
