The third quarter earnings season has revealed that some companies are in trouble. Several high-profile names have reported disappointing financial results that missed Wall Street forecasts by a lot. Many companies issued forward guidance that indicated a slowdown in the economy.
The corporate results, combined with rising bond yields and escalating geopolitical risks, are conspiring to push markets lower. Some once high-flying growth stocks are at risk of a serious decline in their business, which could hurt the share price over a sustained period of time. Here are three growth stocks to sell in October before they crash and burn.
Meta Platforms (META)
Meta Platforms (NASDAQ:META) issued great third-quarter financial results. However, the company’s guidance seemed to warn of trouble ahead, sending the stock down 3% as a result. Specifically, Meta Platforms guided that it expects revenue of $36.5 billion to $40 billion in the current fourth quarter of the year.
That forward outlook was below Wall Street expectations for sales of $38.85 billion in Q4 of this year. Additionally, there are concerns with Meta’s continued spending on its theoretical realm known as the “metaverse,” and the heavy losses that the division continues to incur.
As part of its Q3 print, Meta said that its Reality Labs division, which focuses on virtual and augmented reality technologies, as well as the metaverse, racked up $3.74 billion in operating losses during the July through September quarter. The Reality Labs unit has now lost $25 billion since the start of 2022.
The red ink is a growing concern for many analysts and investors who think it runs contrary to the company’s statement that this is Meta’s “year of efficiency.” META stock is up 133% year to date, but shares have fallen by roughly 10% since the end of July.
Texas Instruments (TXN)
Shares of Texas Instruments‘ (NASDAQ:TXN) stock fell 5% after the microchip company provided a revenue forecast for the current Q4 that missed Wall Street forecasts. The company said it expects revenue in a range of $3.93 billion to $4.27 billion, which is below the $4.50 billion that analysts had forecast for the company. The guidance for the final quarter of this year was viewed as weak by analysts and TXN stock has sold off as a result. The disappointing guidance overshadowed what was otherwise a strong print.
For Q3 of this year, Texas Instruments reported earnings per share (EPS) of $1.85, which was better than the consensus estimate among analysts of $1.82, according to data from FactSet. Revenue in Q3 totaled $4.53 billion which was slightly below expectations of $4.60 billion. The company’s microchips and semiconductors can be found in products ranging from automobiles to consumer electronics. However, Texas Instruments’ chips are not that involved with artificial intelligence, and the stock has largely missed this year’s AI rally. TXN stock has dropped 11% year-to-date.
Micron (MU)
For a growth stock that is in immediate jeopardy, look to Micron Technology (NASDAQ:MU). The company’s share price is down 12% since hitting a 52-week high at the end of May. The decline in MU stock has accelerated since the memory chip maker reported weak financial results that missed Wall Street forecasts by a country mile. For its fiscal fourth quarter ended Aug. 31, Micron reported revenue of $4.01 billion, down 40% from a year earlier, and a net loss of $1.31 per share.
For the full fiscal year, Micron posted revenue of $15.5 billion, down 49% from a year earlier, and a net loss of $4.45 a share. That compares with a profit of $7.75 a share in 2022. The results missed Wall Street forecasts across the board.
Micron expects a loss for this year’s fourth quarter of $1.07 a share which is worse than forecasts for a loss of $1.04 per share. The company says it continues to struggle with weak demand for both its DRAM and NAND memory chips in its core markets of personal computers (PCs), mobile phones, and data centers.
MU stock has dropped 5% since the company issued its most recent earnings at the end of September.
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.
