When it comes to investing, not all that glitters is gold. In fact, the shiny overhyped stocks often blind us to the inherent risks in capital markets, trading at prices completely divorced from their fundamentals. Several such stocks faced a reality check last year, with their frothy valuations melting away to more reasonable levels. However, many of them still trade at unattractive, inflated values.
If you’re knee-deep in popular growth investments, it might be ideal for pocketing some gains. So, let’s dig into the stocks to sell now, enabling you to build a more balanced portfolio. In curating the list, I’ve used an app called Ape Wisdom that lists the most trending stocks on the internet.
Carnival (CCL)
Carnival (NYSE:CCL) has essentially donned the cape of the comeback kid of late, turning heads with its stellar performance since bottoming out in May. However, the voyage ahead isn’t exactly smooth sailing. The pandemic-led challenges continue to haunt the company’s economic fortress, with its balance sheet bearing the brunt.
CCL’s liquidity ratios are firmly in the red, and analysts’ forecasts point to a rocky road ahead. CCL’s adjusted earnings per share depict a steady recovery through 2025. Hence, its EPS is forecasted to be at a negative 14 cents this year, followed by a major improvement to 92 cents in fiscal 2024. That said, it’s still a far cry from the robust $4.4 it generated in fiscal 2019. Moreover, income investors are waiting in the wings, and their return hinged on the unlikely resumption of share repurchases and dividends.
Virgin Galactic (SPCE)
Virgin Galactic’s (NYSE:SPCE) Galactic 01 mission soared triumphantly into the cosmos yesterday, marking its first successful foray with paying customers onboard.
Nevertheless, the victorious ascent is an eye-wash from the company’s financial gravity. Virgin Galactic’s balance sheet tells a sobering tale of operational hurdles and looming losses. Despite a backlog of 800 tickets for its suborbital joyrides, the company is trapped in a maze of operational challenges. Moreover, Unity’s four-passenger capacity with the company’s lofty operating expenses paints a bleak financial picture ahead. Future hopes rest on its forthcoming spaceship Delta, promising substantially greater capacity and higher flight frequency. However, with a 2026 launch date and competitors like Blue Origin not waiting for the dust to settle, and hence the road to success for Virgin Galactic remains clouded with uncertainty.
AMC Entertainment (AMC)
AMC Entertainment (NYSE:AMC) has been a popular high-risk meme stock that stayed afloat despite the pandemic-induced waves. To fuel its recovery, AMC now aims to ramp up equity and potentially execute a reverse stock split.
With a staggering debt load of more than $4.8 billion, AMC’s journey remains tumultuous. Even as cinephiles gradually return to theaters, the box office is barely catching a break. Its first-quarter sales were $1.8 billion, lagging 25% behind the pre-Covid era. The narrative further twists with streaming services gaining ground and consumer habits evolving in this period. A comeback for AMC isn’t out of sight, but it seems to have fallen off the meme stock radar. AMC stock is down more than 50% in the past year, and more volatility is expected with the stock ahead.
Lucid Group (LCID)
The electric vehicle realm’s sparkling debutant, Lucid Group (NASDAQ:LCID), burst onto the scene with a high-profile SPAC merger. Led by Tesla alums and auto industry veterans, many had envisioned the company to become a juggernaut in its niche. However, the going has been remarkably tough for Lucid.
Its financials bear the brunt of its limited production, with losses mounting swiftly. In the first quarter, the firm chalked up sales of $149.43 million, but a staggering net loss of approximately $780 million, or 43 cents per share, overshadowed its sales figure. Following a $3 billion common stock offering, Lucid now eyes global expansion and the launch of new models, potentially stoking its cash burn. Worryingly, the pace of deliveries is lagging, with positive free cash flow unlikely until 2026 or 2027. With this backdrop, the specter of equity dilution seems to loom large over Lucid’s financial future.
Gartner (IT)
Gartner (NYSE:IT) is an established research and advisory firm catering to a myriad of sectors, including IT, HR, and marketing. Anchored in a fascinating sector offering long-term appeal, the firm recently outpaced analyst estimates and boosted its outlook for the year, a feat worth noting. However, despite a promising scenario, Gartner’s journey isn’t devoid of challenges. The rapid tech evolution propelling the demand for its services also mandates constant vigilance and adaptability. Nevertheless, it has done well for the years to adapt effectively, and its lofty double-digit growth numbers seem plausible for the foreseeable future. The main concern, though, with Gartner stock is its lofty share price. IT stock trades over 26 times forward cash flows and more than 4.5 times forward sales estimates.
Carvana (CVNA)
Another popular pick among meme stock traders is Carvana (NYSE:CVNA), which has recently been soaking up the Wall Street spotlight. The online used car retailer has seen its shares triple in value last few months, but its financial condition remains in shambles beneath the gloss of its sterling performance.
Though its second-quarter outlook strikes a positive chord, it could be a flash in the pan. It could potentially be a spike propelled by a quirk in loan sales timing. Moreover, the company grapples with a staggering $9 billion in debt and cumulative losses north of $2.2 billion. Negative cash flows, debt-driven capital infusions, and equity fundraisers continue to weigh down its business. Despite the allure of its stock market performance, Carvana’s path forward seems littered with multiple stumbling blocks.
BlackBerry (BB)
Once a darling in the smartphone realm, BlackBerry (NYSE:BB) has effectively morphed into an infamous meme stock. The firm effectively ceded its dominance post the iPhone’s advent, reinventing itself as a cybersecurity and Internet-of-Things specialist. However, BlackBerry’s current image casts a stark contrast against its past glory as financial turmoil unfolds.
As part of its strategic reshuffle, BlackBerry embarked on a cash-raising journey, selling off 32,000 patents pertaining to its legacy mobile devices and wireless networking business. Despite these questionable moves, its management remains incredibly optimistic about its future. Projections indicate a heartening 13.5% compounded annual growth over the next three years, powered by its IoT and automotive ventures. However, with a decade of waiting for a BlackBerry revival and a checkered past, the path to a successful resurgence appears elusive.
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
