Learning what not to invest in within the stock market is as important as knowing the right stocks to invest your money in. Investors like to find stocks that may be undervalued to buy at a discount. This can be a dangerous investment strategy going after companies that have seen their share price cut in half in the last year; for example, just because they are trading so low comparatively may lead to disappointment instead of considerable profit potential in a stock reversal.
Stocks may perform poorly, from lagging profits, disappointing future outlook, litigation, or adverse investor sentiment. It is vital to look into a company before purchasing shares and possibly get into a situation you must prepare for. These three stocks I will mention below have a range of issues that I recommend to steer clear of.
Nio (NIO)
Nio (NYSE:NIO) makes small electric vehicles and provides charging infrastructure throughout China, and the company was founded in 2014. Nio’s stock price has dropped by over 60% this last year. They have had declining sales growth over a few years, and supply chain issues, lower EV prices, and steep competition have led this company’s share price and outlook to fall dramatically. In January 2021, NIO was trading at over $60 per share. Now, they are at around $8 per share.
In their most recent earnings report, which was for the fourth quarter full year 2022 results, Nio posted a net loss that more than tripled compared to the full year 2021, which even coincided with a total revenue increase for 2022 of 36%.
The company has seen growing deliveries recently of decent margins. However, it’s not producing any sustained changes in the overall shoe price of the company, with them still being underwater in terms of net income and with increased competition in China and internationally. Nio seems like a stock that you should avoid.
DISH Network (DISH)
DISH Network (NASDAQ:DISH) located in Denver, Colorado, is a telecommunications company that provides pay-TV services, internet, and phone plans. It is no secret that basic cable providers have been struggling for many years, with most consumers switching to other forms of home entertainment, such as Netflix (NASDAQ:NFLX) and many other streaming services. The company saw net income more than cut in half in the first quarter compared to Q1 2022. On top of that, they saw decreased revenue growth and a shrinking customer base.
On May 25, the company announced that they are seeking a deal with Amazon (NASDAQ:AMZN) to provide sales wireless plans through Amazon’s platform. Following this, the company has seen a 16% increase in its stock price. Overall, DISH has been a struggling company. This deal with Amazon could be a game changer for them, but we will have to see. I will still avoid this stock until this deal has gone through and I see some positive results.
Coinbase (COIN)
Coinbase (NASDAQ:COIN) is a company that provides financial infrastructure for cryptocurrency. They are located in Wilmington, Delaware. There has been some significant news lately following all the issues surrounding the collapse of FTX. The (Securities and Exchange Commission) SEC has recently filed a lawsuit regarding Coinbase and the most major cryptocurrency platform Binance. The lawsuit alleges that Coinbase that they have misled investors by operating an intermediary since 2019 on transactions while evading disclosure requirements. And engaged in trading multiple crypto assets that should have been registered as securities.
Following this lawsuit, the company saw a 20% dip in its stock price. Since its Initial Public Offering (IPO) in April of 2021, COIN shares are down nearly 85%. The company has been struggling over the past years. This lawsuit alleging financial wrongdoing is another reason to stay away from Coinbase.
On the date of publication, Noah Bolton did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
