Amidst the relative calm on Wall Street, including the S&P 500 inching forward, the potential bubble in tech stocks poses a challenge for investors. The cooler-than-expected jobs report and a retreating bond market indicate that the Fed’s hawkish stance may soften. Hence, it becomes imperative for savvy investors to look at tech stocks to sell to optimize their portfolios.
Therefore, before the market writes its next chapter, a discerning look at your tech holdings could prove to be imperative. Hence, in this nuanced shift in market dynamics, let’s explore three tech stocks to offload from your portfolio.
Wipro (WIT)
Wipro (NYSE:WIT) straddles a relatively fine line in the tech sphere, boasting AI offerings and a powerful strategic base in India’s growing economy. The company’s forte lies in staffing IT talent adept in the programming of AI language models.
However, the swift pace of AI evolution threatens to outmode Wipro’s services. Though the firm exhibits stable sales and earnings, actual growth in these realms is stagnant.
Wipro’s latest financials hardly exude any confidence, with its Q2 GAAP EPS of six cents falling short by a penny. Furthermore, the company’s top-line declined in value to $2.71 billion, missing by $40 million estimates, painting a somber picture. Forward-looking into the third quarter, Wipro projects a downturn. The IT Services business segment revenue may potentially dip by 1.5% to 3.5% in constant currency terms.
Coinbase Global (COIN)
Coinbase Global’s (NASDAQ:COIN) recent performance, with a sharp uptick surpassing 151% year to date (YTD), has many on Wall Street taking notice. However, the glow of its rapid bump in value is dimmed by less visible concerns. The company’s massive market cap and robust projected sales are at odds with a worrying negative EPS.
After-hours trading on November 2 saw COIN’s stock fall by over 5%. This, despite reporting a narrower third quarter loss and revenue which outperformed gloomy forecasts. Surprisingly, a victorious Ripple Labs lawsuit sent COIN tumbling over 30%. And, ongoing SEC disputes further muddle the waters. January’s defense appears as a mere intermission before the likely upheaval of the 2024 presidential elections.
Coinbase’s negative operating margins and projected earnings losses raise questions over its management’s capability to navigate through intensifying competition efficiently. Scrutinizing the balance sheet, investors find additional reasons for caution. GuruFocus assigned a disheartening Profitability Rank of 3 out of 10 and a Financial Strength rank of a mere 4 out of 10. There’s much left to be desired in COIN’s financial metrics.
Snap (SNAP)
Snap (NYSE:SNAP), renowned for its fiercely dedicated user base, faces a complex challenge in scaling to mass-market glory.
As competitors cannibalize its unique features and TikTok captures its key demographic, Snap seems lost in its niche. The disconcerting 2023 data only serves to amplify its concerns, with platform sales plateauing and losses mounting to new highs.
Moreover, the company’s daunting $769.6 million operating loss in the first half of the year leaves investors grappling with the viability of its business model. The road to profitability, cluttered with economic headwinds and aggressive competition, is looking increasingly precarious.
In the face of these headwinds, CEO Evan Spiegel’s ambitious plans for a 20% rise in ad sales by 2024 strike a note of bold optimism. Yet, amidst the economic downturn and the company’s spiraling losses, confidence in the stock is waning. Although Snap’s Q3 daily active users rose, its revenue modestly exceeded forecasts. Glimmers of progress were overshadowed by broader, more persistent challenges the company must overcome.
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.
