With the broader indices such as the S&P 500 and the Nasdaq surging higher, there’s little sense for investors to hold on to these struggling stocks to sell. The potential for losses is very high with this list of companies, and I therefore advise investors to exercise caution.
While it’s tempting to hold onto stocks out of loyalty or hope for a turnaround, the financial markets are unforgiving, and sentiment can shift rapidly. In a market environment where growth and innovation are richly rewarded, companies that fail to keep pace may find themselves left behind. As a result, their stock prices can suffer.
Investors who decide to hold on to what are losing companies may also face steep opportunity costs. That’s in addition to company-specific risks that are difficult for almost any investor to manage.
So here are three struggling stocks to sell for March. Consider these names closely.
Lucid Group (LCID)
One of the top struggling stocks to sell is Lucid Group (NASDAQ:LCID). Unfortunately, the electric vehicle manufacturer has not lived up to its initial growth expectations. As Investorplace has noted, vehicle deliveries and production have both seen declines. And despite price reductions, demand remains weak.
I agree with this sentiment. For the year 2023, Lucid reported a $2.83 billion loss, with revenues decreasing slightly from $608 million in 2022 to $595 million. The company’s target for 2023 was adjusted downwards mid-year from an initial goal of more than 14,000 units to just over 10,000.
Short sellers have taken a keen interest in LCID stock, with a substantial amount of short interest. At the moment, 29.05% of its total floated shares are short. Bears are understandably pessimistic about its long-term future, which is underpinned by its very long runway toward profitability, as well.
I don’t think there are many compelling reasons for investors to hold on to LCID stock when it trades at 12 times sales and has negative earnings. Investors can pick up a comparatively-priced EV for the same amount of cash with much reduced risk.
Peloton Interactive (PTON)
Peloton Interactive (NASDAQ:PTON) is a company headed for disaster. The brand is known for its interactive fitness equipment and subscriptions, which peaked during the pandemic.
Despite underperforming in 2023, with shares slumping 20%, Peloton reported a narrower loss than expected in its Q1 2024 earnings, with revenue topping estimates. The CEO highlighted the bike rental service as a significant growth opportunity, projecting a 90% year-over-year revenue growth for FY 2024.
However, I don’t think that these efforts can save the company. For one, the market is not optimistic about its prospects. We can see that as it trades at just 0.6 times sales. Part of this may be due to the weakness of its balance sheet, with a net cash position of negative -$4.40 per share. Worse, PTON burned through around a third of its balance sheet. That leads me to believe that PTON will either need to add to its debt or institute a capital raise. Both of which are bad for investors.
It’s almost assured that it will run out of cash before breaking even, as forecasts suggest it will be well beyond FY2028 before it turns in positive accounting profits. There’s just not enough meat on the bone to sustain my interest in PTON given that its peak came and went very quickly, which makes it one of those struggling stocks to sell.
ChargePoint (CHPT)
ChargePoint (NYSE:CHPT) is another one of those struggling stocks. This is because it faces headwinds from the market’s shift to the North American Charging Standard (NACS).
Additionally, CHPT stock’s financial health has been a point of concern. There are significant cash burn rates and the need for a $150 million revolving credit facility.
All of this is wrapped up in CHPT’s business model, which involves significant upfront costs for businesses installing EV charging stations. That’s in addition to ongoing maintenance and network connectivity subscriptions.
These problems underscore why I’m bearish on CHPT. Plus, it would explain why its stock price has tanked 71.35% within the last six months.
On the date of publication, Matthew Farley did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
