3 Stocks to Purge ASAP Before They’re Pulled off Life Support


  • These three stocks to sell now are clinging to life support and should be purged from your portfolio before they implode.
  • Netlist (NLST): A tech company burning through cash at an alarming rate with declining profitability and a high risk of dilution.
  • CureVac (CVAC): This vaccine company has failed to capitalize on the mRNA hype, with a dismal shareholder yield and no profits expected until 2030.
  • Virgin Galactic (SPCE): Ambitious space tourism plans are draining cash reserves, and legal battles raise further concerns about its viability.
stocks to sell now - 3 Stocks to Purge ASAP Before They’re Pulled off Life Support

Source: shutterstock.com/Leonid Sorokin

There are several stocks to sell now that are clinging to life support. These companies have been diluting their shares and burning cash at an alarming rate, making a successful comeback an increasingly unlikely prospect. Rather than accepting reality, management has resorted to desperate measures to keep the lights on, effectively kicking the can down the road at the expense of shareholders.

Holding on to such stocks is a surefire way to watch your hard-earned capital vanish into thin air. As tempting as it may be to hold on, hoping for a miraculous turnaround, cutting your losses and purging these dead weights from your portfolio is prudent.

These stocks could also present an opportunity for short selling. However, I would not bet against any single stock. Instead, consider spreading your short positions across multiple companies with dismal fundamentals. This diversification strategy could help mitigate the impact of a potential short squeeze, where the gains from other positions could offset losses from unexpected rallies.

Short selling should not be undertaken lightly. The potential losses are theoretically infinite. If you’re uncomfortable with that level of risk, it’s best to steer clear. With that in mind, let’s take a look at the three stocks to sell now.

Netlist (NLST)

Business man using computer hand close up futuristic cyber space decentralized finance coding background, business data analytics programming online VPN network metaverse digital world technology. tech stocks
Source: thinkhubstudio / Shutterstock.com

At first glance, Netlist (OTCMKTS:NLST) might seem like a promising tech company poised to benefit from the AI and data boom. However, don’t let appearances fool you. This company is hemorrhaging losses, and its meager cash reserves paint a bleak picture for survival in the coming quarters. With an Altman-Z score of -2.85, Netlist is firmly in the distress zone.

Click to Enlarge
Source: Chart courtesy of GuruFocus.com

While revenue growth appears robust, it comes at the expense of profitability. The company’s gross margin is a paltry 2.7%, which has declined rather than improved. Dilution could prove crippling if Netlist runs out of funds, a scenario that seems increasingly likely.

I’ll concede that losses are expected to narrow, but you should remember that stemming the bleeding will likely necessitate price hikes, which could, in turn, throttle revenue growth. Even at the current pace, you’re paying a premium of 3 times sales for Netlist’s growth. It’s a high-risk, high-cost gamble that isn’t worth taking—definitely a sell.

CureVac (CVAC)

The logo for CureVac (CVAC) is displayed on a smartphone screen over a yellow background.
Source: rafapress / Shutterstock.com

CureVac (NASDAQ:CVAC) is a vaccine company that has failed to live up to the hype surrounding it. A few years ago, mRNA technology was one of the most promising fields, garnering significant attention and investment. However, that momentum has been stripped away as COVID-19 vaccines became mired in controversy and politicization. The stock has been in free fall since mid-2021, and I don’t foresee a recovery anytime soon.

While the company has managed to grow sales, it has come at the expense of shareholders. CureVac’s shareholder yield of -38% is worse than 88% of biotech companies, an industry already notorious for its lack of profitability. Even more concerning, analysts don’t expect the company to turn a profit through 2030, yet you’re still paying almost 11 times forward sales. This stock is not worth buying, as the situation will likely deteriorate further.

Virgin Galactic (SPCE)

A photo of a man smiling into a camera on a plane.

Virgin Galactic (NYSE:SPCE) is another company that showed immense promise on paper. Taking wealthy individuals to space and charging a premium for the experience is a great concept.

However, building the necessary infrastructure and ensuring it meets rigorous safety standards is an enormous and costly challenge. I suspect Virgin Galactic is simply ahead of its time, and it is unlikely to truly fulfill the lofty expectations investors had just a few years ago. Bankruptcy is likely once the cash runs out.

The company is also embroiled in a legal battle with Boeing (NYSE:BA), allegedly failing to pay $26.4 million in invoices. Virgin Galactic’s runway is rapidly shrinking, with over $1 billion in losses over the past two years and only $874 million in cash remaining. While analysts project profitability by 2028, you have to question the wisdom of paying a steep 77 times forward sales premium for a space company, given the near-certainty of delays in this sector.

SPCE financials
Click to Enlarge
Source: Chart courtesy of GuruFocus.com

It’s one of the stocks to sell now.

On the date of publication, Omor Ibne Ehsan 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.

Omor Ibne Ehsan is a writer at InvestorPlace. He is a self-taught investor with a focus on growth and cyclical stocks that have strong fundamentals, value, and long-term potential. He also has an interest in high-risk, high-reward investments such as cryptocurrencies and penny stocks. You can follow him on LinkedIn.

Article printed from InvestorPlace Media, https://investorplace.com/2024/05/3-stocks-to-purge-asap-before-theyre-pulled-off-life-support/.

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