Even though the Fed’s interest rate hikes flushed a lot of losers out of the market since 2022, a handful of stocks to short remain, against all odds. These three companies are pure products of ZIRP-era enthusiasm, and though each trades well below pandemic period highs, they’re still grossly overvalued. While each may not face delisting anytime soon, that’s a good thing—if you’re looking for the best stocks to short.
Each of these three companies face continued challenges ahead and, in many cases, even more complex troubles in light of the Fed’s affirmed “higher for longer” stance. With the next Fed meeting scheduled for the end of this month, expect turbulence to continue—and these stocks to short to fall off a cliff.
Beyond Meat (BYND)
You’d think that legions of panicked shoppers stocking up before an emergency – but completely eschewing plant-based meat products – would have been enough to put Beyond Meat’s (NASDAQ:BYND) ambitions to bed. That doesn’t seem to be the case, though. Despite BYND shares trading well below past highs, the stock has popped about 4% since January 1st, making it one of the best stocks to short, as its improved valuation won’t last long.
Just look at Beyond Meat’s fourth-quarter financials for proof. Sales down for both the quarter and full year? Check. Earnings and profit margin down across the same periods? Check. In fact, though sales slumped “just” 7% on a quarterly basis and 18% annually, profits plummeted even further as Beyond’s quarterly net loss hit $155 million (more than double 2023’s Q4). Though end-of-year losses were slightly better, marking $338 million compared to 2023’s $366 million, poor profits accelerated as the year went on. This means that Beyond Meat is in a financial tailspin as reduced consumer interest and tighter margins make the plant-based food stock a perennial loser and primed as a top stock to short.
Upstart Holdings (UPST)
Like Beyond Meat, we can easily pinpoint Upstart Holdings’ (NASDAQ:UPST) market peak. Not in terms of share price, necessarily, but when stock trader Mark Minervini famously fumbled the bag when asked to explain Upstart’s value proposition live on air. In an ironic twist, that interview—which happened in mid-October 2021— literally marked UPST’s top as it peaked at $390 per share on October 15th, 2021, before falling to just ~$25 per share today. If you were curious, Minervini offloaded his position soon after his ill-fated interview. But that doesn’t mean Upstart Holdings doesn’t remain a top stock to short, especially as it has a (relatively) long way to fall further.
Like many fintech and alternative lending stocks (Affirm Holdings [NASDAQ:AFRM] also comes to mind), Upstart is struggling in today’s high-interest rate regime and, considering the Fed’s newly hawkish stance, don’t expect a rate drop to save Upstart’s bottom line any time soon. Loan origination, Upstart’s bread-and-butter, dropped 19% in 2023’s fourth quarter compared to the same period in 2023. Likewise, sales slumped 4% while the company’s net loss in Q4 hit $55 million—more than $10 million more than 2023’s Q4. Upstart was lucky in the sense that it somewhat preceded the artificial intelligence craze but, as we’ve seen with Lemonade (NYSE:LMND), some sectors aren’t sufficiently high-margin enough for upstarts (pun intended) to jump in and compete with the big boys, no matter how advanced their “AI” systems claim to be.
Carvana (CVNA)
Carvana (NYSE:CVNA) is unique on this list of stocks to short because, unlike the others, it isn’t in a tailspin. Instead, Carvana stock is shockingly high, considering the many bearish factors weighing on its business model. That makes Carvana a top stock to short in light of overvaluation and (in my mind) imminent downfall. To be fair, the company isn’t destined for the dustbin—not completely. Carvana’s management expertly navigated higher interest rates, supply chain troubles and more by cutting costs and realizing the company’s first-ever profitable period. But is that enough to justify a $16+ billion valuation, let alone its 800% per-share return over the past year? I think not.
Remember that, broadly speaking, the used car market is in a unique position. Logistical troubles made new car sales difficult as semiconductors and similar tech keeping the cars running were in short supply. That sent used car prices soaring, but generally, vehicle supply is starting to outpace demand. One report predicts that the used car market will grow by just 1% this year while dealers will begin aggressively discounting new models and increasing Carvana’s competition. Carvana has a place in the wider car market, to be sure—but today’s per-share pricing is far too high considering 2024’s less-than-rosy outlook.
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.
