We’re back to the bear/bull seesaw in August, but bears seem to be winning. The market’s dropped sharply since the end of July, bringing more pain each day. Furthermore, signs point to much of the touted “soft landing” victory cries being premature. Total Federal public debt hit an all-time high at $31.46 trillion in May. Consumers are struggling, too, as revolving loan debt, like credit cards, also hit an all-time high in August. While retail is racking up debt, they’re also saving less than ever. The personal savings rate fell to just 4.3%, almost 30% lower than the mid-pandemic high.
None of these signs point to an optimistic future for stocks. The trouble may be just beginning. Investors are rightfully nervous, shaken by 2022’s correction that brought equities back down to Earth (as well as most retail investors’ gains). At the same time, Treasuries and fixed-income generate yield for the first time in years. Investors are increasingly cycling into “boring” assets, and, if you’re holding any of these stocks, you might want to sell them in favor of something safe. Here’s a look at 7 stocks to sell for cash right now.
GameStop (GME)
Bond market legend Bill Gross says it’s time to sell GameStop (NYSE:GME). And investors should listen when someone with as prolific an investing history as Gross says it’s time to move on. Earlier this week, Gross tweeted, referencing AMC’s (NYSE:AMC) recent dilution event and subsequent stock crash, that “GME is next — just my opinion.”
Of course, GME bulls (or monkeys, or whatever they call themselves) will point to several years’ worth of big-name investors forecasting an early end to the original meme stock. And, generally, many of those big-name investors weren’t completely correct. Still, the stock is down more than 50% from its price last year, and there’s further downward potential — the financials bear this out.
The company hasn’t turned a profit since 2018. Although Executive Chair Ryan Cohen came to the company with some admittedly admirable plans to turn the firm around, economic conditions simply won’t allow for a reversal in the short term. As a consumer discretionary stock, GameStop’s core products are the first cuts when households clamp down on spending. And, even for hardcore gaming adherents, there are too many alternative options.
Poor financials, pricy brick-and-mortar locations, and a still-inflated valuation mean anyone still holding GameStop should sell ASAP.
Meta Platforms (META)
Meta (NASDAQ:META), in a desperate bid to stay relevant among younger users committed to X (formerly Twitter), launched its ill-advised Threads venture in July. A month later, the market’s reaction is a resounding ambivalence. After closing in on 50 million users at the beginning of July, only 10 million remain active a month later. Those stragglers, in turn, only spend about three minutes on the platform. We don’t know for sure how much the venture cost Zuckerberg and the Meta team, but it’s clear they don’t see a return on their investment.
The move, of course, comes on the heels of the equally ill-fated metaverse venture. Combine that massive expenditure with dwindling ad sales, revenue, and income, and it’s clear Meta isn’t the juggernaut it once was.
There’s still time for the Meta team to right the ship but, trading at a price-to-earnings (P/E) ratio above 35, it’s clear Meta is overvalued. Its valuation and share price aren’t sustainable in today’s competitive environment, not to mention the economic landscape. If you haven’t put Meta on your list of stocks to sell for cash, now might be the time.
Virgin Galactic (SPCE)
Virgin Galactic (NYSE:SPCE) emerged as one of the biggest SPAC-era losers, but it’s still hanging on by a thread. Although the company recently turned a profit, driven by finally sending tourists into space, its prospects don’t look good.
In a recent earnings call, the company admitted its current spacecraft isn’t sustainable for long-term operations. Instead, they’re building a next-generation vehicle that (might) lead to profitable, long-term operations. But therein lies the core problem. Research and development, not to mention manufacturing, are pricy endeavors.
Although Virgin Galactic projects about $2 million in revenue for the remainder of the year, they also expect negative cash flow in the $120 million to $130 million range for each quarter. Even with a decent cash balance (currently around $940 million), burning cash at that rate isn’t sustainable. If Virgin Galactic can’t find new funding quickly, they may run out of fuel within the next two years. And, practically speaking, building, testing, and operationalizing a new spacecraft will take far longer than that. Speaking of practicalities — you’d be wise to add SPCE to your list of stocks to sell for cash now.
Rocket Companies (RKT)
I’m bullish on Rocket Companies (NYSE:RKT) long term but, in today’s climate, investors are better off deploying their capital elsewhere. Reliant mostly on mortgage origination and loan servicing, Rocket suffers from the same interest rate struggles as other financial service companies.
Rocket has yet to turn a profit this year, driven (of course) primarily by reduced mortgage origination. Revenue fell by 65% this year, and for as long as mortgage rates hover around the 7% mark, Rocket is fighting an uphill battle. Rocket is diversifying its financial offerings, including capturing a growing solar lending market through Rocket Loans, but all of Rocket’s growth potential hinges on a lower-rate environment.
Rocket has a bright future, particularly as it enjoys 90% client retention, an expanding portfolio across multiple financial sectors, and a growing share of the overall mortgage market. But the stock trades at 2x its current book value, and until things change, investors should stash their cash in securities with greater upside potential. For investors bullish on Rocket, I think the best strategy is to delay buying (or sell), ladder short-term Treasuries, and wait for a better entry point.
DoorDash (DASH)
This food delivery company got smacked with a $2 million fine in Australia for violating spam laws this week, but that’s just one of the many reasons investors should ditch DoorDash (NYSE:DASH). To be fair, the company has the largest share of the online food delivery market, but that doesn’t make the stock a buy.
Like other discretionary items, food delivery is among the first to go when tightening budgets, And DoorDash’s audience skews young, with most aged between 25 and 34. That demographic also makes up the greatest share of student loan debt holders so, when forbearance ceases shortly, already-tight budgets will close further. DoorDash’s core audience will likely start slowing their order rate, and, without diversified services like Uber (NYSE:UBER), DoorDash will lose its primary revenue drivers.
DoorDash’s margins are already nonexistent, with the company holding a -11% EBITDA margin and generating an abysmal -18% return on equity. Food delivery is, ultimately, a losing game for most companies in the sector, and DoorDash isn’t an exception. Until the firm figures out its path to profitability, this stock is a sell.
Roblox (RBLX)
Roblox (NYSE:RBLX) took a beating during last month’s earnings report, and there’s little hope of imminent recovery. The company lost $282.2 over the quarter, down from an already-abysmal $176.4 million loss this time last year. In the earnings call, execs blamed ballooning losses on overhead and infrastructure, citing overall “higher levels of expense required to support the growth of the business.”
That excuse may have flown in an era of easy money, but today’s market is all financial fundamentals and cost-cutting. As management also said they expect losses “for the foreseeable future,” this stock easily makes the stocks to sell for cash list.
Snap (SNAP)
Like Meta, Snap (NYSE:SNAP) suffers from stiff competition and limited success adapting to changing market trends. Advertisers are leaving the platform in droves, represented by the company’s sharp decline in monthly revenue. The thrust of Snap’s advertising woes, beyond competition like TikTok, is inherent to the platform. Snapchat is, in essence, an instant messaging app more than a consumable media delivery platform. That makes advertising prospects challenging to justify, and companies aren’t willing to toss cash to the platform to see what sticks any longer.
Snap’s stock is, against all odds, up almost 10% since January. It’s fallen on hard times and dropped 20% since mid-July alongside the rest of the market. This downward move is likely only the beginning, and savvy investors know that Snap is definitely one of the stocks to sell for cash right now.
On the date of publication, Jeremy Flint held no positions in the securities mentioned. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
