When it comes to figuring out what are the stocks to sell now, bearish analyst ratings are an important factor to consider.
The sell-side typically doesn’t issue many “sell” ratings. In fact, a majority of ratings are “buy” or equivalent, with around 5%-10% being “sell” or equivalent and the rest “hold” or equivalent.
As I have discussed previously, blindly following Wall Street “buy” ratings isn’t necessarily a profitable move. The same could possibly be said about blindly shorting stocks rated “sell” by the analyst community.
Analysts were willing to issue a bearish warning on a stock, which serves as a red flag to sell or avoid.
The following three stocks to sell now have each received “sell” or equivalent ratings in recent months. You may want to take heed of these analyst warnings.
DXC Technology (DXC)
DXC Technology (NYSE:DXC) gives off strong “value trap” vibes. Shares in the IT services company may at first seem appealing because of a low valuation (6.7 times forward earnings).
However, DXC stock has performed poorly in recent years. Largely, because of disappointment about a turnaround for the company has yet to arrive.
Of course, a delayed turnaround doesn’t mean there’s zero chance of an eventual turnover. Still, that didn’t stop analysts at JP Morgan from downgrading DXC back in January, from “neutral” (equivalent to “hold) to “underweight” (equivalent to “sell”).
Lowering their price target from $27 to $24 per share, the analyst team cited high uncertainty about a comeback taking shape this year. Mainly, because of industry headwinds, as well as the fact that new corporate culture needs time to emerge in order for DXC Technology can make major progress turning around its business.
Lucid Group (LCID)
I’ve been very bearish on Lucid Group (NASDAQ:LCID), but I’m certainly not the only one arguing that it is one of the top stocks to sell now. Since last year, several sell-side analysts have issued negative rating changes.
Most recently, last month, following the EV maker’s latest quarterly earnings release.
As InvestorPlace’s William White reported Feb. 22, analysts at Cantor Fitzgerald downgraded LCID stock from “neutral” to “underweight,” and its price target from $6 to $4 per share. The analyst team cited the EV maker’s poor 2024 production guidance provided alongside earnings as a key reason behind the downgrade.
The Cantor analysts also noted “persistently high negative margins” and “lower-than-anticipated demand” as other factors warranting a bearish view on shares. While now trading below the aforementioned price target, as Louis Navellier and the InvestorPlace Research Staff has argued, LCID could sink to even lower prices (under $1 per share).
Rocket Companies (RKT)
During November and December, shares in mortgage giant Rocket Companies (NYSE:RKT) surged sharply. Investors wagered that anticipated interest rate cuts in 2024 would drive a comeback for the housing sector.
However, since the start of the year, RKT stock has slid slightly. Not only is there now high uncertainty about the Federal Reserve soon pivoting sharply on interest rates. It’s now debatable whether the Fed will even reduce interest rates at all this year. Worse yet, interest rate uncertainty isn’t the only possible issue at hand with the stock right now.
Back in January, analysts at Citi downgraded RKT to “sell,” primarily on valuation concerns. With the stock (even after the modest pullback) trading for 38.4 times forward earnings, essentially pricing in a mortgage demand rebound as a near-certainty, you may want to follow Citi’s recommendation, and cash out immediately.
On the date of publication, Thomas Niel 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.
