As the curtain fell on September, the stock market lamented its losses. The three major indexes ended last month firmly in the red. The S&P sagged by 4.87%, and the Nasdaq tumbled 5.81%, marking the grimmest monthly decline for the indices since the chilly winds of Dec. 2022. Meanwhile, the Dow shed 3.5%, making it the gloomiest since February. Historically, September has been an unfavorable month for the stock market, and sadly, this year followed suit. Remarkably, even some of the market’s darlings weren’t spared. As you read on, you’ll find some of the most popular investments, shedding more than 10% to 20% in value. With that said, let’s look at seven September stock losers to avoid.
September Stock Losers: Snap (SNAP)
Navigating through the ebbs and flows of the digital advertising space, Snap (NYSE:SNAP) was once viewed as a bellwether social media stock to buy. However, post-pandemic, the company appears to be stuck in a quagmire of underperformance. Despite a modest 10.6% year-over-year (YOY) bump in net income in its second quarter, the platform recorded a notable 3.6% slide in sales, lagging behind its competition. In five out of the past six quarters, Snap failed to beat analyst top-line estimates. Moreover, with a stark $377 million net loss reported in the second quarter, Snap’s financial stability remains questionable.
Peering into the near future, Snap’s upcoming earnings release scheduled for October 25th looms potentially ominous, with dark clouds of another sharp sell-off on the horizon. Therefore, Snap is struggling to remain relevant as it looks to pivot toward profitability amidst the current economic undercurrents and weaknesses in its business. That’s why it’s first on the list of September stock losers.
Block (SQ)
Navigating a financial minefield, Block (NYSE:SQ), formerly known as Square, continues to take a hammering at the stock market, diving more than 70% from its August 2021 pinnacle, dovetailing a myriad of setbacks and uncertainties. From a damning exposé by Hindenburg Research to unexpected c-suite changes, Block has been on the receiving end of late. Moreover, despite being flush with a ton of cash, the absence of a shareholder’s rewards program is puzzling.
Adding another layer of complexity, Alyssa Henry, the helm of its profit-generating Square payments unit, recently vacated her position for CEO Jack Dorsey to fill amidst an already turbulent era for Block. This unforeseen executive shuffle has, unsurprisingly, done no favors for SQ stock, with its stock down more than 25% year-to-date (YTD). To be fair, though, Block continues to be championed by many as an undervalued giant with untapped potential in the fintech arena. However, its stock can’t seem to catch a break, consistently recording new lows.
Netflix (NFLX)
In the ever-evolving streaming realm, Netflix (NASDAQ:NFLX) is looking toward making another strategic change. According to reports, once the ongoing strike by Hollywood actors reaches its finale, the streaming giant intends to adjust the price tags of its ad-free tier. Moreover, the company is tightening the noose on password sharing and, in a paradigm shift, ushering in paid advertisements.
Though these maneuvers hold potential, they come at a price. Revenue streams might swell with the hike, but the potential fallout resulting in global subscriber erosion is concerning. Additionally, the already parched content landscape, courtesy of a six-month Hollywood production halt, further exacerbates its troubles. Additionally, NFLX stock’s valuation metrics further muddies the waters, with it trading at an astronomical 36.8 times forward cash flows, a staggering 434% increase compared to the sector median.
Align Technology (ALGN)
With it being a revolutionary force in orthodontics, Align Technology (NASDAQ:ALGN), the brainchild behind the Invisalign clear aligner system, finds itself grappling with the intricacies of a maturing market. Its weakening financials are indicative of its fading market share, with its YOY revenue and EBITDA growth plunging to a disheartening negative 6.33% and a negative 27.6%, respectively. Looking ahead does not provide much solace either, with forward EBITDA estimates dangling at a negative 2.55%.
Moreover, the competition is heating up in its niche with formidable players like SmileDirectClub, Candid, and others as it looks to navigate through choppy waters. These competitors, wielding lower prices and direct-to-consumer models through their digital platforms, are in a better position to tackle the complexities of the economic environment.
The stock’s lofty valuation further muddies the waters for prospective investors, with it trading at an eyebrow-raising 40 times non-GAAP TTM, which towers 127% above the sector median, propelling ALGN into a precarious position.
3M (MMM)
Navigating through the tapestry of 3M’s (NYSE:MMM) recent performances unveils a rather challenging narrative for this multi-faceted manufacturer. While the business’s ubiquity and diversification have historically been its strength, this year has been remarkably challenging for it, with an alarming 5.8% drop in sales along with a 13.1% drop in EBITDA growth on a YOY basis.
On top of that, it has been embroiled in ethical and legal controversies, from allegations of water pollution via toxin releases to producing defective earplugs for U.S. Army service members; hence, with its declining organic growth, legal upheavals, and plummeting stock price, it’s best to avoid wagering on 3M at this time. The narrative thus weaves caution into the investment outlook despite the bulls pointing to value opportunities following the drop in its price.
Shopify (SHOP)
Amidst the swirling economic currents, eCommerce behemoth Shopify (NYSE:SHOP) has navigated with a degree of nimbleness, offering a 31% bump in YOY revenue uplift to $1.69 billion in its second quarter report while maintaining a positive cash flow for the third consecutive quarter. Even when eyeing the startling $1.6 billion operating loss, a discerning gaze shows that the drop is mainly due to one-time items, including expedited stock-based compensation post the sales of the logistics business. Consequently, Shopify will have delivered another quarter of profitability.
However, macroeconomic concerns and its hot valuation raise major concerns. A significant factor in its subdued warning is the whisper of inflation, fueled by escalating oil prices, which casts a gloomy shadow on consumer purchasing power and the broader economic stability. Moreover, SHOP stock’s existing valuation treads on precarious grounds, trading around a staggering 104.4 times forward earnings and surpassing 9.4 times its forward sales, subtly hinting at a potentially overbought scenario.
HubSpot (HUBS)
Last on the list of September stock losers is HubSpot (NYSE:HUBS). Despite the market volatility, HUBS appears, at least on the surface, to be a beacon of resilience. The company’s stock has astonishingly surged more than 60% this year, a feat that’s all the more impressive given the prevailing headwinds. Its results are bolstered by the growing adoption of its powerful AI tools, including ChatSpot, and an appreciable diversification strategy, which underscores its potential.
However, scratch the surface, and the sheen starts to lose its luster. Its revenues are still growing at an impressive pace but have slowed down from the 40%+ growth it was delivering during the pandemic years, casting doubts over its lofty valuation. On a non-GAAP basis, the company stock is trading at an eye-watering 91 times forward earnings. Moreover, the broader macroeconomic scenario marked by rising interest rates, being a prime example, threatens to tighten the noose around companies with stretched valuations.
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.
