Growth stocks have been off to a strong start in 2024. Artificial intelligence tailwinds have propelled many sectors, and the technology has been a boon for the major indices. The S&P 500 is up by 13% year-to-date while the Nasdaq Composite has gained 14% year-to-date. However, dark clouds are forming on the horizon. With those dark clouds, we’ve noticed a few growth stocks to sell.
A disappointing jobs report featured rising unemployment and fewer jobs than anticipated. It can be even worse than suggested, with job growth being revised downward for most of this year’s jobs reports. The Fed tipped investors off on rate reductions, but lower interest rates may not result in a soft landing.
Even with AI tailwinds powering up most of the stock market, it’s been a rough ride for these growth stocks. They are all down over the past month and have dragged down the S&P 500. Any macroeconomic pressure can lead to additional losses for investors who have these stocks.
Uber (UBER)
The ride-sharing app is up by 1% year-to-date and has gained 46% over the past five years. However, Uber (NYSE:UBER) shares are in the middle of a correction that can get worse. The company’s first quarter was decent, with 15% YOY revenue growth. You have to take the company’s $654 million net loss with a grain of salt since that figure includes $721 million in unrealized losses related to the revaluation of Uber’s equity investments.
If unemployment continues to rise, consumers will get more defensive. They won’t go out as much which can result in decelerating revenue growth in future quarters. Many corporations have reported slower revenue growth and discouraging guidance for the third quarter. It wouldn’t be shocking to see Uber become a part of this trend when it reports earnings later this week. Declining populations in major cities in the United States can also lead to long-term challenges since Uber does most of its business in big cities. Make sure this is one of the growth stocks to sell in your portfolio.
Adobe (ADBE)
Adobe (NASDAQ:ADBE) has shed 9% of its value year-to-date. Some investors are concerned that artificial intelligence can take away some of Adobe’s market share, especially as it gets more advanced. While Adobe still looks like the premier solution for creatives and businesses that want high-quality images and videos, many may feel inclined to cut corners and have AI tools generate images and video clips.
The creative software company reported 10% YOY revenue growth in Q2 FY24. The company also closed out the quarter with $17.86 billion in remaining performance obligations. Adobe cited a “highly differentiated approach to AI and innovative product delivery” as catalysts that attracted customers and increased retention. Net income was up by 21% YOY.
While those results are good on the surface, a 47 P/E ratio doesn’t leave much room for error. Adobe’s hypergrowth days are over, and valuation is becoming more important as economic headwinds build. Investors can find better deals in the current stock market.
Starbucks (SBUX)
The iconic coffee giant has been a tough hold for long-term investors. Starbucks (NYSE:SBUX) stock is down by 19% year-to-date and has lost 21% over the past five years. A 3% dividend yield offers plenty of income, but that doesn’t matter too much if the losses continue to grow. Even a 21 P/E ratio doesn’t make the stock look captivating in the current economic climate.
Starbucks delivered a disappointing Q3 FY24 earnings report that featured a 1% YOY decline in revenue. Comparable sales decreased by 3% YOY worldwide, headlined by a 14% YOY decline in China comparable store sales. Many U.S. companies are struggling to hold onto their market share in China, and it’s coming at a bad time for those corporations and their shareholders.
Starbucks has 7,306 stores in China and recently stated that the U.S. and China make up 61% of its global portfolio of stores. Slowdowns should continue as consumers have had enough with rising prices. Slowing sales and no way to raise prices without losing even more customers isn’t a winning formula for Starbucks or its investors. This is easily one of the top growth stocks to sell.
On the date of publication, the responsible editor did not have (either directly or indirectly) any positions in the securities mentioned in this article.
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.comPublishing Guidelines.
