U.S. stocks sustained a jaw-breaking rally in 2023, with the Nasdaq beating all other indices, accruing a more than 43% return.
While stocks largely did not begin 2024 with a great start, the major indices have risen in the past few weeks. Both major indices, S&P 500 and Nasdaq, have risen more than 7% year to date (YTD). While equities appear to be in a rally, that doesn’t mean there aren’t any stocks to completely avoid as if you would a landmine.
Let’s explore three such stocks to avoid during this stock market rally.
Apple (AAPL)
The renowned iPhone maker, Apple (NASDAQ:AAPL), has continued to see its share price slump. The last time I wrote about Apple’s stock, it had fallen more than 5% already YTD. Unfortunately, the sell-off has continued with Apple’s share price down around 6.6% YTD.
Apple is falling out of favor with many investors. Specifically, the iPhone-maker’s end-markets are oversaturated, and the company has no clear diversification strategy. The company’s fourth-quarter report for 2023 saw revenue decline by 1% year over year (YOY).
Even with billions of dollars of cash on its balance sheet, Apple still hasn’t effectively pivoted into new end-markets. The company’s new virtual reality (VR) headset has made a lot of buzz. Yet, sales have struggled, and reviews have been mixed. The Chinese market, which accounted for about 18.9% of Apple’s revenue at the end of fiscal year 2023, will also continue to give the iPhone maker a difficult time with the surprising return of Huawei.
Also, because of Apple’s reputation, many investors probably invest in the company’s shares absentmindedly. But, for some investors, this could be a landmine. Therefore, investors should definitely beware.
Lucid (LCID)
Lucid (NASDAQ:LCID) stock has had a long bumpy ride. Investors eagerly bought LCID shares after its 2021 IPO, raising $4.5 billion for Lucid. Its Saudi backers provided capital during tough times.
However, the new EV maker is far from dethroning Tesla (NASDAQ:TSLA) or even China’s BYD (OTCMKTS:BYDDY). In Q4 2023, BYD sold 526,409 electric vehicles (EVs), while Tesla sold 484,507.
BYD’s sales are still increasing despite an EV slowdown. In January, the company sold 205,588 electric vehicles. And Tesla finds itself in a similar situation. So, while growth has slowed, there is no debate about which brands are amongst those dominating. Lucid will struggle to gain market share.
So far, LCID’s shares have fallen 21% YTD, and on a five-year basis, Lucid’s shares have fallen even more – down 66%. Given its terrible 5-year return, Lucid has effectively been a landmine already for certain investors. Still, the automaker’s share price can fall further as the EV slump continues to materialize, putting current shareholders portfolios in even more jeopardy.
Etsy (ETSY)
Etsy (NASDAQ:ETSY) operates two-sided online marketplaces that connect buyers and sellers in the U.S., the U.K., Germany, Canada, Australia, France, and India. Its primary marketplace is Etsy.com that connects artisans and other entrepreneurs with consumers. Like many online businesses, Etsy received a significant “Covid bump” in 2020, when it saw top-line growth reach 111%. Moreover, in 2021, Etsy’s revenue increased by 35%.
Unfortunately for the e-commerce platform, inflation and high interest rates have taken a definitive toll on the company’s growth. In their Q4 earnings report, results were mixed. While Etsy eked out a revenue beat, its earnings arrived under Wall Street’s estimates. Also, gross merchandise value (GMV), the measure of the value of goods moving through the platform in Q4, decreased YOY. Etsy shares are down more than 42% over the past twelve months.
Further, U.S. economic data is pointing to a less even recovery from inflation, which could hold off any interest rate cuts until the latter half of 2024. This could, in turn, make economic conditions worse for consumers and e-commerce platforms like Etsy more broadly.
On the date of publication, Tyrik Torres did not hold (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.
