The energy sector continues to be challenging for investors to navigate. Crude oil prices peaked at $122 a barrel in June 2022 after Russia invaded Ukraine. Since then, prices for crude have dropped below $70 a barrel, rebounded to more than $90, and have now settled right around $80 per barrel.
After 2022 record profits, oil producers have struggled in recent quarters. Declining profits and an uncertain outlook now that war has erupted in the Middle East are the main culprits. Natural gas companies haven’t fared much better. Clean energy concerns and electric vehicle makers struggle to turn a profit.
In this difficult environment, investors need to proceed cautiously to protect their capital. So, let’s examine three energy stocks to sell before the end of the year.
Solar energy company SunRun‘s (NASDAQ:RUN) share price was bludgeoned this year, amid poor financial results and a critical short-seller report. RUN stock is now down 56% on the year.
The latest blow came from a short-seller report by Carson Block, founder of Muddy Waters Research. In his report on SunRun, Block claims that the company is grossly overstating its subscription numbers.
Also, Block’s critical report on SunRun claims the company is taking advantage of government subsidies under false pretenses. The negative short seller report has had a detrimental impact on RUN stockas well as the company’s recent earnings. Most recently, RUN reported a loss of $1.07 billion for this year’s third quarter, or $4.92 per share. This is definitely an energy company to sell before year’s end.
Investors are increasingly caution with oil giant Exxon Mobil (NYSE:XOM). Recently, the company announced its acquisition of rival Pioneer Natural Resources (NYSE:PXD) for $60 billion. Specifically, Exxon Mobil said it will pay $59.5 billion for Pioneer in an all-stock deal.
It’s Exxon’s biggest acquisition since its merger with Mobil in 1999. While the deal will make Exxon Mobil the dominant oil producer in the Permian Basin of Texas, it also saddles the company with plenty of debt.
The total value of the takeover is $64.5 billion with Pioneer’s debt load factored into the equation. Additionally, the Pioneer acquisition shows that ExxonMobil is doubling down on fossil fuels at a time when the industry is moving towards clean energy alternatives. The deal was announced as crude oil prices were marching higher and above $90 a barrel. But now, crude prices have slid to near $80 a barrel and showing signs of weakness. XOM stock is flat on the year but down 5% over the last 12 months.
Rivian Automotive (RIVN)
It’s going from bad to worse at electric vehicle maker and battery company Rivian Automotive (NASDAQ:RIVN). The company’s shares fell 20% in a single trading session in October. It had just lowered its forward guidance and announced plans to raise additional cash.
Specifically, Rivian said that sales in the current fourth quarter of the year are likely to be lower than Wall Street forecasts. Also, the company announced plans to issue $1.5 billion in convertible notes, diluting current shareholders.
Rivian’s electric pick-up trucks sell at an average price of $80,000. That figure puts them out of reach for many consumers. However, the trucks are so expensive to produce that Rivian is selling them at an average loss of $33,000 each. In addition, the company claims it’s burned through half of its $18 billion cash pile in recent months. Management is focusing on lowering costs and streamlining production. Meanwhile, RIVN stock has declined 87% since its IPO two years ago. Time to sell.
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.