The equities markets, especially the Nasdaq, had shown remarkable resilience and growth since the beginning of 2023. However, things have changed remarkably in the past couple of months. The S&P500 and Nasdaq are only returning 10.0% and 26.8% since the start of the year. In September, for example, these indices returned around 34.1% and 17.6%, respectively, which speaks to the volatility markets have experienced recently.
With further ado, below are three stocks that have not performed well throughout much of 2023. Subsequent bouts of volatility could suddenly push returns down even further; therefore, investors ought to sell before it’s too late.
EPAM Systems (EPAM)
EPAM Systems (NYSE:EPAM) is a technology services company providing digital platform engineering and software development services on a global scale. The company’s engineering services include requirements analysis and platform selection, customization, cross-platform migration, implementation, and integration. EPAM provides what the company calls ‘infrastructure management services,’ including software development, testing, and maintenance of private and public digital infrastructure.
EPAM has benefitted from many companies outsourcing certain tasks to tech or business services companies, allowing them to focus their own resources on what’s important. Since 2019, the tech services company has maintained robust top-line growth rates in the double digits, while margins have landed where you would expect for a technology services provider (typically between 32-34%).
Unfortunately, in 2023, revenue growth has been lackluster, hitting only 3.4% Y/Y growth in the first quarter and slipping 2.1% in the second quarter. The fall in top-line growth is perhaps mostly due to the devolving economic environment. EPAM’s management team maintained weak revenue guidance due to a lack of customer demand. The stock is down about 32.2% YTD, and if investors are still in, they should seriously contemplate selling before more money is lost.
Lightspeed (LSPD)
Lightspeed (NYSE:LSPD) is a cloud-based commerce platform that enables small and medium-sized businesses (SMBs) to manage their online and offline operations. The company has expanded its offerings to include payments, marketing, analytics, and loyalty programs. Digital transformation efforts amongst SMBs have created a number of growth tailwinds for Lightspeed in recent years. Since 2017, the commerce platform’s revenue growth has averaged 61.2%.
However, Lightspeed has several weaknesses that could undermine both the company’s growth prospects and the value of its shares. First and foremost, the company is currently operating an economic environment that is not very kind to SMBs, its core customer base. Small and medium-sized businesses tend to churn or not upgrade certain products or services during times of uncertainty, which could negatively impact Lightspeed’s near-term growth rate. Moreover, Lightspeed faces fierce competition from the likes of Shopify (NYSE:SHOP), Block (NYSE:SQ), and PayPal (NASDAQ:PYPL). The commerce platform’s lofty valuation, which sits at 63.8x forward earnings, makes it hard to recommend now as investors continue to scrutinize valuation multiples.
BILL Holdings (BILL)
BILL Holdings (NYSE:BILL) is a cloud-based platform that automates and simplifies the billing and revenue management process for businesses. The company helps its customers to generate invoices, collect payments, recognize revenue, and comply with accounting standards. Over the years, BILL enjoyed strong demand for its services, as more businesses across the board shifted to subscription-based and recurring revenue models.
However, similar to Lightspeed, BILL is already suffering from sluggish customer growth due to its historical focus on SMBs. Year-over-year growth for quarterly revenue in 2023 has fallen behind the triple digit growth metrics the company reported in 2022. Despite slower growth, BILL happens to be still trading at an inflated valuation of 52.0x forward earnings. Current investors should sell before the stock is hit with a big devaluation.
On the date of publication, Tyrik Torres 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.
