Small-cap stocks, defined by a market capitalization between $300 million and $2 billion, can tempt investors looking for quick returns. However, these small-cap stocks to avoid can be incredibly volatile as they are lucrative, making them a potential danger zone for the unwary investor.
In the ever-shifting tides of the stock market, it’s not uncommon for investors to find themselves stuck in a sinking ship, hastily offloading their shares at a loss. Therefore, they must consider risky small-cap stocks to sell to minimize their risk.
That said, let’s look at three small-cap stocks at risk, offering little upside potential ahead.
| PGRE | Paramount Group | $4.71 |
| CARA | Cara Therapeutics | $3.39 |
| VMEO | Vimeo | $4.50 |
Paramount Group (PGRE)
In venturing into the realm of real estate investment trusts, Paramount Group (NYSE:PGRE) presents a cautionary tale.
Despite owning a robust portfolio of Class A office buildings in prime locations such as New York and San Francisco, PGRE is a REIT to avoid now.
From a pre-pandemic high of over $15 per share, PGRE stock has nosedived to under $4.7 per share today. Fueled by pandemic restrictions, the burgeoning work-from-home trend took a major toll on demand for office space, particularly in Paramount’s key markets.
The REIT’s woes don’t end there. The collapse of First Republic Bank, once PGRE’s largest tenant, has weighed down its stock and businesses.
Looking ahead, Paramount faces a rocky road. With leases spanning millions of square feet set to expire in the coming years and weak office space demand persisting, this REIT could see further declines.
Cara Therapeutics (CARA)
Cara Therapeutics (NASDAQ:CARA) is a biopharma giant with pioneering work in developing treatments for pruritus patients.
Its breakthrough came in 2021 when the FDA green-lit its Korsuva injection, making it one of the only approved treatments for pruritus associated with chronic kidney disease in adults undergoing hemodialysis. However, the journey has been far from smooth sailing.
In the past year, CARA has witnessed a massive erosion of its equity value, shedding more than 60% of its value.
Adding to the company’s hurdles is the uphill battle Korsuva faces in securing a significant market share in its hotly competitive niche. Its flagship product grapples with fierce competition, high costs, and modest efficacy, making it a tough sell in the market.
Its business continues to bleed red ink, offering little value to its investors. It has an Altman Z score of 0.37, putting it in the distress zone.
Vimeo (VMEO)
Vimeo (NASDAQ:VMEO) dubs itself a top video experience platform that continues navigating a challenging business transformation journey.
Its attempt to compete with giants like YouTube in the video streaming landscape fell short, prompting a change in leadership and strategic direction. Spearheaded by CEO Anjali Sud, the firm may become a top B2B software-as-service niche.
It is looking to carve out a space in the competitive enterprise market while developing robust video tools for small businesses.
However, the path has been steep. Early this year, the company announced a workforce reduction of 11% because of various macroeconomic pressures. The numbers speak for themselves. With a user base of nearly 290 million, only 0.5% are paying subscribers.
The decline is stark as in 2021, Vimeo had approximately 1.7 million paid subscribers, which fell to about 1.5 million self-serve and add-ons subscribers and 2.5 thousand Vimeo Enterprise Subscribers by the first quarter this year.
On the date of publication, Muslim Farooque 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.
