Exit Now! 3 Growth Stocks to Sell in February 2024


  • Investors should avoid these growth stocks to sell.
  • Texas Instruments (TXN): Revenue and earnings have been declining.
  • Dropbox (DBX): The company doesn’t have a moat and offers low revenue growth.
  • Zoom (ZM): The video conferencing leader has low revenue growth and a lofty valuation.
growth stocks to sell - Exit Now! 3 Growth Stocks to Sell in February 2024

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Growth stocks are the best investments for people pursuing maximum long-term returns. These equities can outperform the stock market and reward long-term investors. However, assets within this category can also lose significant capital for their investors or stay flat while the market surges. Periodically reviewing your portfolio and assessing your options can help you avoid being stuck with an unprofitable growth stock. These are some growth stocks to sell that investors may want to consider trimming or removing from their portfolios.

Texas Instruments (TXN)

Texas Instruments logo on its world headquarters located in Dallas, Texas.
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Texas Instruments (NASDAQ:TXN), a semiconductor company, missed the artificial intelligence boom. Shares are down by 8% over the past year but are up by 51% over the past five years. The stock offers a 3.20% dividend yield and trades at a 23 P/E ratio.

The company has also had a few quarters of declining revenue. Texas Instruments continued that trend in Q4 2023 by reporting a 13% year-over-year revenue decline and a 10% sequential revenue drop.

The firm projects to generate $3.45 billion to $3.75 billion in revenue. The $3.60 billion midpoint represents an 18% year-over-year revenue decline. That’s not the news you want to hear from a growth stock. 

While Texas Instruments doesn’t have a lofty valuation compared to other picks, investors can do better than this stock. There are many semiconductor stocks at the forefront of the artificial intelligence boom that can generate meaningful long-term returns.

Dropbox (DBX)

an image of the dropbox (DBX) website displayed on a smartphone screen
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Dropbox (NASDAQ:DBX) doesn’t have much of a moat. Competitors like Google Drive also make it easy for users to store files and keep them protected from cyber attacks. These are switching costs for current customers who have integrated Dropbox into their systems. However, that digital infrastructure issue doesn’t exist for prospects who are on the fence.

The equity trades at an 18 P/E ratio but has limited growth opportunities. The firm only reported small gains in paying users and average revenue per paying user. These metrics inched up by 3.5% and 3.3% year-over-year respectively. While net income increased by an impressive 37.1% year-over-year, future earnings growth is limited to the company’s revenue growth.

A 41% rally over the past year allows investors to exit their positions and reallocate their capital into more productive assets. Dropbox stock has only been up by 30% over the past five years and will likely lose value.

Zoom (ZM)

Zoom (ZM) logo on a building
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Zoom (NASDAQ:ZM) is another growth stock that doesn’t have much moat. Google Meetings and Webex are competing meeting platforms that have been gaining traction. Zoom is still the leader in the video conferencing industry, but the company’s growth rates do not reflect a growth stock.

The company only reported 3.2% year-over-year revenue growth in Q3 FY24. GAAP net income surged from $48.4 million in the previous period to $141.2 million in the quarter. While that’s a great growth rate, it’s not sustainable because of 3.2% annual revenue growth. 

Zoom currently trades at an 84 P/E ratio. Yahoo! Finance projects a 14 forward P/E ratio which doesn’t seem grounded in how it will actually play out. The company’s 6.41 PEG ratio does a better job of telling the story. 

Zoom has a frothy valuation and dramatic revenue deceleration. Investors can choose from plenty of better choices instead of sticking with a stock that is down by 12% over the past year.

On the date of publication, Marc Guberti 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.

Marc Guberti is a finance freelance writer at InvestorPlace.com who hosts the Breakthrough Success Podcast. He has contributed to several publications, including the U.S. News & World Report, Benzinga, and Joy Wallet.

Article printed from InvestorPlace Media, https://investorplace.com/2024/02/exit-now-3-growth-stocks-to-sell-in-february-2024/.

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