The realm of doomed penny stocks is treacherous terrain for investors. Hence, it is imperative to tread cautiously within this domain as it often becomes a breeding ground for scam artists and market manipulators who prey on unsuspecting traders.
Moreover, identifying and purging doomed stocks is daunting for investors, especially those with a long-term perspective. While established companies flaunt billion-dollar valuations, penny stocks can be alluring at first glance. However, these appearances can be deceiving, with many of these stocks struggling across multiple facets of their businesses.
Therefore, distinguishing the gems from the rubble is a critical skill every investor should cultivate. Consequently, we will delve deeper into the potential pitfalls and underline the importance of identifying these three doomed penny stocks that threaten your investment portfolio’s stability.
Nikola (NKLA)
Once a promising electric vehicle player, Nikola (NASDAQ:NKLA) is at a crossroads marked by recent upheavals and challenges. For starters, the company’s luminary, founder Trevor Milton, faces a four-year prison sentence for securities and wire fraud. The verdict sent ripples through the EV sector. Adding to the executive suite’s flux, CFO Anastasiya Pasterick announced her exit to pursue new horizons.
Compounding the situation, Nikola is confronting operational gridlock. The firm halted vehicle production last year due to a recall of all of its Tre battery-electric trucks because of a risk of fire in its battery packs. The cessation is supposed to continue until sometime this year, which underlines the gravity of its current predicament.
Nikola’s financial scaffolding is showing signs of strain. Third-quarter non-GAAP earnings of negative 30 cents per share missed forecasts by 16 cents, and stark sales plummeted to negative $1.73 million from last year’s $24.21 million as it was forced to buy back seven trucks from former dealers.
Fisker (FSR)
Fisker (NYSE:FSR), is another American EV innovator grappling with a myriad of challenges. The most recent one was the National Highway Traffic Safety Administration’s scrutiny of its Fisker Ocean model’s braking issues, essentially tarnishing its acclaimed OEM legacy. Nonetheless, in December 2023, the firm proactively addressed these concerns by deploying an over-the-air (OTA) update. However, the damage has been done with the stock tanking over 80% in the past six months.
Moreover, the third quarter unveiled a GAAP earnings per share shortfall of negative 27 cents, missing estimates by six cents. That was coupled with a significant revenue miss of $63.94 million. This financial strain intertwines with a strategic shift to dealership sales aimed at addressing a hefty $290 million inventory of unsold cars. The combination casts a shadow over the firm’s strategic direction and financial stability.
Amidst these challenges, Fisker’s journey ahead seems fraught with hurdles. The company’s path is lined with uncertainty with safety concerns, financial discrepancies, and a questionable shift in sales strategy.
Hyzon Motors (HYZN)
Hyzon Motors (NASDAQ:HYZN) stands at a crossroads in the hydrogen fuel cell sphere. Once a beacon of innovation, the company was marred by legal woes after settling SEC’s charges with a substantial $25 million fine back in September. The move undoubtedly shook investor confidence.
Financial indicators further underscore the company’s predicaments that caused Hyzon’s shares to plummet by a drastic 65.23% year-over-year. A third-quarter report revealed GAAP earnings per share of negative 18 cents, narrowly missing Wall Street’s mark by 2 cents. This financial strain coincides with accusations from short-seller Blue Orca alleging inflated sales projections and dubious claims over its future profitability.
The broader industry is also grappling with issues, including the general struggle to deliver meaningful sales and reliable financial statements. Amidst internal challenges and industry pressures, Hyzon is up against stiff competition in the ever-evolving mobility sector. HYZN stock appears unsuitable for a long-term investment.
On Penny Stocks and Low-Volume Stocks: With only the rarest exceptions, InvestorPlace does not publish commentary about companies that have a market cap of less than $100 million or trade less than 100,000 shares each day. That’s because these “penny stocks” are frequently the playground for scam artists and market manipulators. If we ever do publish commentary on a low-volume stock that may be affected by our commentary, we demand that InvestorPlace.com’s writers disclose this fact and warn readers of the risks.
Read More: Penny Stocks — How to Profit Without Getting Scammed
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
