Markets are off to a shaky start in October. Investor sentiment continues to be largely negative. Several issues are weighing on equities, including the risk of higher for longer interest rates and a slowing economy. In this current situation, a number of stocks are faring worse than others, pulled lower by problems that go beyond the broader market.
Whether poor financial results or negative outlooks and ratings from analysts, some stocks are free falling right now. And as the saying goes, investors should never try to catch a falling knife.
Those already holding the following stocks may want to sell now as the fourth quarter gets underway. Otherwise, they risk incurring bigger losses. While Q4 is traditionally the strongest period of the year for stocks, things may play out differently in 2023.
Let’s examine these three long-term stocks to dump before the damage is done.
Micron (MU)
Micron Technology (NASDAQ:MU) recently issued a disastrous earnings print. The company that specializes in computer data storage and USB flash drives saw its stock fall 5%. This occurred after it announced weak financial results that missed even Wall Street forecasts.
For its fiscal fourth quarter, Micron reported revenue of $4.01 billion, down 40% from a year earlier, and a net loss of $1.31 a share. For the entire fiscal year, Micron posted a year-over-year (YOY) revenue decline of 49% and a net loss of $4.45 per share. That compares with a profit of $7.75 a share in the previous year.
Micron’s forward guidance was equally bad. The company expects a loss for the current quarter of $1.07 a share, worse than consensus forecasts calling for a loss of $1.04 per share. MU admits its continuing struggle with weak demand for its memory chips across its core segments of personal computers (PCs), smartphones, and data centers.
Despite Micron Technology cutting capital expenditures for the full fiscal year by 40% to $7 billion, it was too little, too late. MU stock is still up 33% on the year, yet the outlook for the company is discouraging.
Tilray Brands (TLRY)
Leading cannabis producer Tilray Brands (NASDAQ:TLRY) has just been hit with a harsh short seller report. Kerrisdale Capital accuses the company of massively diluting its stock and misleading investors.
Tilray “has resorted to ongoing, shameless, and massive dilution to stay alive, even as management compensates itself generously while operating metrics further deteriorate,” Kerrisdale Capital states.
Kerrisdale, which has a short position in TLRY stock, goes on to say that the cannabis company is “obscuring losses by issuing shares, instead of recording cash expenses, to one of its largest suppliers”. The negative report comes as Tilray moves to focus on the U.S. market. The Nanaimo, Canadian-based Tilray relocated its corporate headquarters to New York City earlier this year. In addition, it announced the acquisition of several American craft beer makers as it tries to diversity its business.
TLRY stock remains volatile and has been targeted on several occasions by retail investors who have treated the company as a meme stock and executed a short squeeze on its shares. It has declined 98% in the last five years, including a 20% decline this year.
Target (TGT)
On September 27, the “Expect More Pay Less” Target (NYSE:TGT) announced the closing of nine stores in major U.S. cities due to rising incidents of violence and organized retail theft.
Specifically, the company is shutting the doors of one store in New York City, two in Seattle, three in San Francisco, and three in Portland, Oregon. The closings will occur for all nine stores by October 21. The retailer has been vocal about thefts that have driven higher levels of “shrink,” an industry term that describes losses from goods stolen, damaged, or misplaced.
When Target reported Q2 earnings, executives stated that shrink is expected to reduce its full-year profitability by more than $500 million. The company has taken a variety of steps to stop crime at its stores. Those include the addition of locked cases for certain merchandise and the hiring of security guards at many locations.
However, Target has problems that go beyond thefts. The company is also struggling with unsold inventory and a pullback in consumer spending on discretionary items. TGT stock is down 30% on the 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.
