The market continues to hit record highs and macroeconomic reports suggest that the economy is finally healing from high inflation. This all adds up to make one of the most ferocious bull markets in recent memory. However, there are always exceptions to the norm– in this article, we cover three companies that are currently experiencing lackluster or declining sales and products that are facing stiff competition.
While many people see the stock market as a get-rich-quick scheme, the truth is, if you aren’t cautious and well-informed about your investments, it is very easy to lose money. These three companies are likely to have painful news for shareholders, and if you own any shares, you should consider pulling out now, before you have to suffer as well. Here are three stocks to sell before it’s too late:
Stocks to Sell: FuelCell Energy (FCEL)
FuelCell Energy (NASDAQ:FCEL) is a company responsible for the manufacturing and sale of hydrogen-based fuel cell technology. It provides multiple configurations for its products, but to no avail– the company is down 99.64% from its peak and shows no sign of going back up.
There are multiple reasons for this. Looking at financial statements, the company has an operating margin of -184.48%, indicating significant losses. Business isn’t booming either, with year-over-year quarterly revenue declining by 41.5%. While it has taken heavy losses in recent fiscal years, FCEL has a debt of only $151.37 million, with $260.13 million in cash. However, the debt is expected to grow as the company has a negative free cash flow of $-183.38 million.
Additionally, as per many sources, hydrogen-powered fuel cell technology is “dead”, at least in the realm of automobiles. This is a potentially fatal blow for a company that, after being in business for over two decades, still isn’t profitable. Therefore, I strongly suggest you exit all positions in this stock.
Rocket Companies (RKT)
Rocket Companies (NYSE:RKT) provides mortgage and financial services in the United States and Canada, including loan origination, servicing, and refinancing. The company operates through its flagship business, Rocket Mortgage, and also offers real estate, personal loans, and auto financing services through various subsidiaries.
RKT stock is currently trading at $14.30 with a market cap of nearly $2 billion. The company has seen steady revenue decline over the past four years, dropping nearly 4 times from 15.98 billion dollars in 2020 to 4.01 billion dollars in 2023. Analysts have set an average price target of $11.77 for the stock, indicating a potential decline of 17.69% – suggesting the stock is heavily overpriced. Additionally, the company carries a substantial debt load of $12.34 billion, with only $1.06 billion in cash. A negative free cash flow of -$1.57 billion isn’t helping RKT either.
The stock is extremely volatile, reflected by its beta of 2.42, making it a less stable investing option. Furthermore, a significant portion of the company’s revenue comes from refinancing, which is likely to decline as interest rates rise.
Zoom Video Communications (ZM)
Zoom Video Communications (NASDAQ:ZM) provides a cloud-based platform for video and audio conferencing, collaboration, chat, and webinars. It enables individuals and organizations to connect remotely through high-quality video calls and virtual meetings, enabling communication and collaboration across various devices and locations.
ZM stock is currently trading at $56.21 with a market cap of $17.384 billion. ZM is down 18.71% year-to-date, and I expect this negative trend to keep going. While ZM does have pretty great financials, it will be faced with multiple headwinds in the coming days. The Asia-Pacific region delivered a revenue surprise of -1.57%, which, for a platform like Zoom– which runs off of repeat use– isn’t a good sign.
There could be many reasons for this. One that stands out to me is that ZM faces stiff competition from companies such as Google (NASDAQ:GOOG, NASDAQ:GOOGL). Zoom offers a free tier, which grants users access to 40-minute meetings. This is less attractive than Google’s promise of 60 minutes of meeting time for free. Google’s accessibility also makes it a stiff competitor— Google Meets is built into Google Mail, Google Workspace, and Google Classroom.
All of this makes me think that ZM is a risky investment, making it one of the stocks to sell.
On the date of publication, Achintya Pasricha 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.
