Typically, blue-chip stocks in your portfolio can be counted on to be reliable, long-term investments. But times can turn, even for the most well-known stocks in the market. When even top companies get into a rut and lose their way, it’s time to clear your portfolio of blue-chip stocks to sell.
There are compelling reasons to consider blue-chip stocks to sell when they underperform the market or have disappointing years. Blue-chip stocks represent the best, most stable companies and can usually be considered financially sound and historically secure.
But even blue chips can encounter periods of underperformance or disappointing earnings. And when they fail to meet market expectations or consistently underperform, it might signal underlying issues. When it happens over and over again, it signals a red flag for investors. These are often a result of bad management decisions, competition or shifts in consumer preferences.
If you have a blue-chip stock that’s not living up to its potential, it’s time to consider making a move. The Portfolio Grader is an ideal tool to help identify blue-chip stocks to sell, based on its ranking of stocks earnings performance, revenue growth, analyst sentiment, momentum and other factors.
It’s never fun to say goodbye to a favored blue-chip stock. But doing so can help protect your investment portfolio for the long run and give you a better chance to reach your investing goals.
Intel (INTC)
Intel (NYSE:INTC) is a legacy computing company that makes semiconductors. But unlike other companies, Intel is still seeking to find its place as the computer industry turns to high-powered semiconductors that can process artificial intelligence applications and generative AI.
Intel is trying to make its mark as a foundry – actually fabricating the chips for other companies. But its foundry division took a $7 billion loss in 2023, as much of the foundry market is turning to Taiwan Semiconductor (NASDAQ:TSM).
Intel is committed to raising its stake, however. It currently has a 1% market share in the foundry business (versus TSMC’s 58% share) and hopes to turn a profit by 2030.
Earnings for the most recent quarter did manage to top analyst’s expectations for earnings, but revenue of $12.7 billion was short of expectations. And Intel’s guidance for the current quarter was underwhelming, with revenue expected to be between $12.5 billion and $13.5 billion and earnings per share expected to be a loss of 5 cents per share.
INTC stock is down 37% this year and gets a “D” rating in the Portfolio Grader.
Apple (AAPL)
For a long time, Apple (NASDAQ:AAPL) was the bluest of blue-chip stocks. But the iPhone maker is now facing tremendous challenges to grow its business, and the stock is suffering.
Apple is seeing flattening sales figures for its Mac computers, home products, iPads and wearable technology, and iPhone sales in China are dropping. In the first quarter of the year, Apple fell all the way to fourth place in the Chinese market behind China-based smartphone manufacturers Huawei, Vivo and Honor.
Apple’s best-performing division is its Services segment, which includes high-profit products like the App Store. But even that is now coming under fire, with a recent report from influential technology-focused publication TechCrunch alleged that Apple is slow to remove “obviously fake” apps from its store, making the platform unreliable.
Earnings for the second quarter included $90.8 billion in revenue, but that was down 4% from a year ago. AAPL stock is down 1% this year and gets a “D” rating in the Portfolio Grader.
Tesla (TSLA)
Tesla (NASDAQ:TSLA) is still a juggernaut. But the company continues to face some problems, including a few that are self-inflicted.
First, there’s competition. Tesla dominated the electric vehicle market for a couple of years, but other auto manufacturers are catching up. Tesla responded by lowering the prices on some of its models to spur sales and hurt its competitors, but that also had the result of cutting into its own profit margin. And Wall Street didn’t like that at all.
Then there’s the issue of ownership. Tesla’s CEO is Elon Musk, who seems more and more distracted by his other business ventures. Musk sold off billions of Tesla stock to finance his $44 billion purchase of the company formerly known as Twitter. And it can be argued that his antics on that platform, which he renamed X, is making Tesla a less desirable brand.
Tesla stock surged briefly in May on news of the company’s EV maker’s planned growth, including its robotaxi, low-priced vehicle plans, as well as news of the Chinese government giving Tesla approval to sell its Full Self Driving driver assistance technology package in China.
But Tesla is already giving back those gains. If revenue growth and profitability don’t improve, investors may question why TSLA has a high forward earnings multiple of 72x.
TSLA stock is down 27% this year. It gets a “D” rating in the Portfolio Grader.
Nio (NIO)
Chinese EV maker Nio (NYSE:NIO) at one point looked to be a legitimate challenger to Tesla in China. The company looked to be scaling up, and its innovative battery-swapping system seemed to be quick and effective.
But Nio faltered badly. Its stock price, which peaked at $61 per share in 2021, is now just over $5. Shares are down 40% in the last 12 months and 42% in 2024.
And the company has failed to scale its production as investors hoped. Deliveries in April were 15,620 vehicles, which is up 134% from a year ago.
That sounds great until you look at 2022 delivery figures and see the company was producing roughly 14,000 per month two years ago as well.
Nio also has some work to do when it comes to pricing. Its Onvo L60 vehicle model is priced around $34,600, while rival China-based automaker BYD (OTCMKTS:BYDDY) prices its Seagull EV for $9,670. That’s a massive disparity.
Nio is a pass at this point, and it gets a “D” rating in the Portfolio Grader.
PayPal (PYPL)
Fintech play PayPal (NASDAQ:PYPL) seemingly has been around forever. The company saw huge gains during the Covid-19 pandemic as people looked to e-commerce for their shopping needs. But since then, PayPal has been a disappointment.
The company offers a variety of brands, including Zettle, Xoom, Venmo, Honey and Hyperwallet. But there’s also more competition in the fintech space today than there was few years ago, and the number of active PayPal users fell from 435 million in 2022 to 431 million in 2023.
Earnings in the first quarter was a positive note – revenue of $7.7 billion was up 10% from a year ago, and earnings per share of 83 cents was an 18% improvement.
But guidance for the full year shows that PayPal is still expected to see a full-year EPS drop. The company is anticipating EPS of $3.65 for the full year, compared to $3.84 a year ago.
PYPL stock is up only 1% so far this year. It gets a “D” rating in the Portfolio Grader.
Starbucks (SBUX)
Starbucks (NASDAQ:SBUX) revolutionized the coffee industry with its cool coffeehouses, quality menu and its army of baristas to whip up a favorite caffeinated beverage. From its modest beginnings in Seattle in 1971, Starbucks now has more than 38,900 locations around the world.
But there are challenges as well. Starbucks has major ambitions in China, but Luckin Coffee (OTCMKTS:LNKCY) surpassed it as the nation’s top coffeehouse. It also has a pricing plan that Starbucks can’t compete with, which will make it even more challenging for Starbucks to maintain its reduced market share.
Earnings for the second quarter showed revenues down 2% from a year ago to $8.6 billion. Global comparative store sales were down 4%, with sales in China down 11%.
SBUX stock is down 15% this year, and is the only blue-chip stock to sell on this list that has the ignominy of an “F” rating from the Portfolio Grader.
McDonald’s (MCD)
McDonald’s (NYSE:MCD) is the world’s best known burger chain. The company that brought us Ronald McDonald, the Big Mac and Happy Meals has more than 38,000 locations and serves roughly 68 million people every day.
But like other food chains, McDonald’s is fighting inflation and higher prices – and it’s seeing a drop in customers as a result. The chain more than doubled the prices of some menu items in the last decade, such as the McDouble sandwich that went from $1.19 in 2014 to $3.19 today.
CEO Chris Kempczinski acknowledged that it’s become a problem and that McDonald’s would have to cut prices as a result. “Eating at home has become more affordable,” he said.
More traffic will be great – but as Tesla proved, lower margins are also a problem for investors, and it will be interesting to see if McDonald’s can figure out a way to increase foot traffic and sales without cutting its margins.
Wall Street is betting it cannot. MCD stock is down 12% in 2024 and gets a “D” rating in the Portfolio Grader.
On the date of publication, Louis Navellier did not hold (either directly or indirectly) any positions in the securities mentioned in this article.
On the date of publication, the InvestorPlace Research Staff member primarily responsible for this article held long positions in AAPL and BYDDY. The staff member did not hold (either directly or indirectly) any other positions in the securities mentioned in this article.
Communications, 5G, Technology, Artificial Intelligence, Consumer Discretionary, Automotive, Electric Vehicles, Financial, Fintech, Restaurant, Retail, Semiconductor
