The one constant on Wall Street is change. Just over the past three years the S&P 500 has been a roller coaster ride. While the general trend has been up, much like the long history of the broad market index, it has definitely not been in a straight line. This causes analysts to constantly attempt to predict which way the market will go, and therefore which stocks to sell and which to buy.
The index lost a third of its value in the weeks after the pandemic was declared. Then it went on an incredible run higher throughout all of 2021. That was followed by the market crumpling last year, only to rebound again this year. So far in 2023, the popular benchmark index is 15% higher than where it started. But Wall Street is warning that some stocks are not likely to participate in any future growth. In fact, their price targets indicate these are stocks to sell or to avoid like the plague. Analysts are warning the following three stocks could plunge over the next 12 months.
C3.ai (AI)
Especially since the release of ChatGPT, artificial intelligence (AI) is the latest trendy investment segment. Few stocks have capitalized on the buzz this year as much as C3.ai (NYSE:AI). Announcing it released a suite of generative AI products similar to what ChatGPT can accomplish sent shares soaring. The stock is still up 194% year to date despite having lost a third of its value from recent highs..
Analysts think it can fall further. Wolfe Research analyst Joshua Tilton set the bar low in April by setting a price target of $14 a share, 42% below its current price. He argued a “negative macro outlook” could impact C3.ai’s revenue growth for 2024. With companies reining in spending, it “threatens the uptake of C3.ai’s newly introduced consumption model.”
The enterprise AI company previously utilized a subscription-based model. But, chairman and CEO Tom Seibel says cloud-based companies are moving away from that model. C3.ai is following suit to help smooth out revenue lumpiness. Yet, with losses growing and operating margins shrinking, C3.ai may visit lower levels even if it doesn’t hit those rock bottom prices.
GameStop (GME)
Video game retailer GameStop (NYSE:GME) is still a stock Wall Street loves to hate. But sometimes it’s with good reason. Despite its enduring love by the meme stock crowd, GameStop still does not have a bright future.
GameStop made a big bet on crypto saving its fortunes. It setup a non-fungible token NFT marketplace to buy or sell tokens and created a crypto wallet where they could be stored. However it recently said it would discontinue support for the wallet due to “regulatory uncertainty of the crypto space.”
In June GameStop also fired its CEO who was in the position for just a year. Last month its CFO resigned. The video game company is in disarray. Its stock reflects the turmoil. Shares are down 50% from their 52-week high. Wedbush analysts Michael Pachter and Nick McKay set a $6.20 per share target price, but believe it’s on a slow train to $0.
“We remain convinced that GameStop is doomed, with declining physical software sales and a shift of sales to subscription services and digital downloads sealing its fate.” Having fired its CEO, it will be difficult to find a replacement.
Apple (AAPL)
Analysts also like to consider Apple (NASDAQ:AAPL) when considering stocks to sell, though often to their own chagrin. The tech giant manages to pull surprises out of a hat on a regular basis.
Despite forecasts that iPhone sales were evaporating, Apple stock managed to march 50% higher. Beginning August 1, however, they’ve since lost 91% of their value. Is this the big pullback Wall Street has been waiting for?
National Bank Financial set its price target at just $54 per share. That was way back in January when the stock was around $125 per share. That was just a 56% pullback it was forecasting, but now after Apple’s big run up, it implies a 69% drop.
Most other analysts seem to think there’s more upside ahead, with a near $200 per share price target. Analysts at Kantar believe the industry is on a downswing. It says global three-month smartphone volumes through June are down 14% from last year. Services are now Apple’s future and I would expect more upside before we see a significant pullback in the stock. A $54 price level seems unthinkable.
On the date of publication, Rich Duprey 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.
