In the volatile stock market landscape, witnessing stocks rise meteorically isn’t rare. Enthusiasm over future prospects soars when companies post market-beating earnings, champion innovative technologies and secure a dedicated customer base. Nonetheless, change is the unyielding constant, and many of the top businesses during the pandemic bull run have taken a turn for the worse, becoming the stocks to sell.
On the upside, the U.S. equity landscape got off to an encouraging start this year, primarily due to the breakthroughs in generative AI. Nevertheless, the shadow of inflation, although diminished from last year, hasn’t completely faded. It is particularly impacting businesses catering to consumer markets. As consumers become more cautious, a noticeable cutback in spending is evident.
Furthermore, in this market surge, careful evaluation is imperative. While many companies thrive in the present bullish environment, a select few face the challenges of rapid inflation and potential global economic slowdowns.
Stocks to Sell: Home Depot (HD)
Home Depot (NYSE:HD), a robust blue-chip player, has dazzled investors with an impressive 60% surge in shares over the past five years. It held its ground well in 2022, pointing to the stock’s resilience. However, a recent 10% year-to-date decline, most of which happened in the past week, has raised eyebrows. While retail theft is a concern, the more pressing issue is the plummeting housing demand, which has nosedived to its lowest level since 2010.
Moreover, the company has reported declines in both revenue and earnings growth for two straight quarters. To put it in perspective, the quarter preceding these declines showed a growth below 0.3% in revenue and earnings year-over-year.
Furthermore, the inflation specter looms large, threatening consumer spending. Home Depot has been candid about this challenge, forecasting a dip in sales and comparable sales of 2% to 5% for fiscal 2023. This forecast aligns with the company’s observations of a persistent downtrend in consumers splurging on high-end items.
Upstart Holdings (UPST)
Some stocks face the chopping block due to internal missteps, while others, like Upstart Holdings (NASDAQ:UPST), grapple with intimidating external challenges. Upstart, a fintech maverick with an AI-driven lending platform, showcased a stellar 86% gain year-to-date. However, its year-over-year revenue growth declined by 48%.
Moreover, a concern that cannot be ignored is the drastic $1 trillion credit card debt shouldered by Americans, a new alarming record. While some might argue this surging debt signifies confidence in the U.S. economy, it’s a balancing act if economic stability shifts. Coupled with this, recent alerts from major retailers highlight increasing consumer strains.
Against this backdrop, Upstart’s prospects appear shrouded in uncertainty. The TipRanks analysts have also sensed turbulence, aligning their views towards a Moderate Sell for UPST. For cautious investors who value stability, the unpredictable trajectory of Upstart suggests it could be an opportune moment to reevaluate their positions in the stock.
In the competitive landscape of the electric vehicle (EV) sector, Workhorse (NASDAQ:WKHS) epitomizes the challenges and aspirations faced by newer entrants. While the EV industry is abundant with opportunities for innovation and potential profitability, it simultaneously presents formidable risks. These challenges have, unfortunately, steered some promising companies towards less than favorable outcomes.
Following a similar path, Lordstown Motors (OTCMKTS:RIDEQ), conceived as a strategic spin-off from Workhorse to bolster shareholder interests, recently found itself in the midst of bankruptcy. This downturn proved to be unfavorable for Workhorse, as its stock now precariously lingers below 50 cents. While its EV ventures failed to ignite market interest, such trends indicate a bleak outlook ahead.
Furthermore, despite Workhorse’s ambitious pivot towards the burgeoning realm of drone technology, the shadows of its previous failures to generate significant vehicle revenue remain. If this drone venture doesn’t show promising results soon, Workhorse might tragically follow in Lordstown’s footsteps towards bankruptcy.
On the date of publication, Muslim Farooque did not hold (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.