October is renowned for its potential to unsettle investors with significant market drops, a trend that continues from the previous month. Indeed, while certain stocks have shown an ability to weather volatility, some falling stocks are down and could still see greater declines.
Here are three such stocks that have been down significantly recently and are likely to see further declines in the future. These are companies I remain bearish on over the medium- to long-term, despite past successes that may have made these stocks favorites among certain investors.
Moderna (MRNA)
Moderna (NASDAQ:MRNA) aims to move beyond its success in recent years, emphasizing that it’s not just a Covid-19 vaccine company.
CEO Stéphane Bancel intends to transform it into a long-term pharmaceutical success story by launching 15 new products in the next five years, similar to Pfizer’s (NYSE:PFE) approach of launching 20 products in the next 18 months. Both companies are shifting focus post-pandemic, despite 2023 stock price declines. However, Moderna’s revenue decline was more severe, falling by 95% in Q2. Pfizer, a more established pharmaceutical giant, experienced a more gradual decline with a diverse portfolio of therapies.
Moderna’s risk is higher due to its dependence on vaccine revenues and lack of experience in pharma sales cyclicality. Until the company generates a majority of its revenue from more than one product, this stock is a sell for me.
Ark Innovation ETF (ARKK)
ARK Innovation ETF (NYSEARCA:ARKK) is ARK Invest’s premier actively managed fund, led by investor Catherine Wood. It aims for long-term capital growth by investing in disruptive innovation companies spanning automation, AI, robotics and fintech.
ARKK has faced a tough stretch, as it’s currently down 74.58% below its $156.58 peak from February 2021. Inflation and aggressive Fed interest rate hikes weighed on it, hurting high-growth tech stocks.
Rising inflation and robust January jobs data suggest potential aggressive rate hikes. Many economists predict at least one more Fed rate hike by year-end. This might risk an economic downturn, advising investors to avoid falling stocks affected by higher borrowing costs amid a pressured stock market.
Roku (ROKU)
Roku (NASDAQ:ROKU), once a pandemic success story that witnessed impressive revenue growth, profitability and rising stock popularity. However, in 2022, the company faced declining revenue, losses and economic challenges, causing its stock to plummet. Surprisingly, 2023 has been a turnaround year with Roku shares nearly doubling. While revenue is improving, the company faces challenges and a high valuation that may pose risks.
The company lacks profitability, despite a 16% year-over-year increase in members. However, this growth rate falls short for a company aiming for robust expansion, with net revenue increasing by just 11% year-over-year.
Roku’s stock relies heavily on expectations of future revenue growth. However, the company’s projected Q3 revenue of $815 million reflects just a 7% year-over-year increase, which is lackluster given its valuation. Roku has experienced minimal revenue growth in recent quarters and, if this trend continues, it could potentially lead to a year-over-year revenue decline, posing a significant risk to this option in falling stocks.
On the date of publication, Chris MacDonald 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.
