Growth stocks have captivated investors’ minds for many years. Some stocks have soared 1,000% over the past five years. The few growth stocks that reach that level of success have accumulated generational returns for their early investors.
However, not every growth stock follows that script. Many growth stocks have lofty valuations due to the high expectations and significant risks. While pressure can create diamonds, it can also shatter companies. Some growth stocks aren’t poised to deliver promising returns for investors, let alone beat the stock market. These are some growth stocks to sell while you still can.
ChargePoint (CHPT)
ChargePoint (NYSE:CHPT) reached public markets in 2021 via a SPAC. That set a market frenzy at a time when stocks commanded strong momentum if they had anything to do with electric vehicles. Investors overlooked glaring issues, hoping they had exposure to the next Tesla (NASDAQ:TSLA).
However, it didn’t last. Reality has hit the stock hard, as it has been down by roughly 80% over the past year. It’s now a penny stock, and things don’t seem to be getting better. Revenue decreased by 24% year-over-year in Q4 FY24, while the company’s net loss went from $78.7 million to $94.7 million. That’s a 20.3% year-over-year increase in net losses.
Declining electric vehicle sales don’t spell good news for ChargePoint. Less demand for EVs can create less of an incentive for the company’s EV charging solutions. The company doesn’t have much time to weather uncertainty as it continues to burn through cash while seeing its business shrink.
Snap (SNAP)
One good quarter has not undo the company’s problems. Snap (NYSE:SNAP). Q1 2024 revenue increased by 21% year-over-year, which was impressive, but the company’s net losses remained high. Snap’s losses narrowed slightly from $329 million to $305 million.
Profitability remains a key issue for the company, and it doesn’t look like Snap will become profitable anytime soon. Other social media giants have already reported a string of profitable quarters and have more robust business models.
Daily active users increased by 10% year-over-year to reach 422 million. It looks like a growth stock again, but net losses and competition from other social networks can hamper the company’s growth potential. Investors can choose from other social media stocks with fewer risks, more attractive valuations and profitability.
Wall Street analysts are mixed and have currently rated the stock as a “Hold.” The highest price target is $20, while the lowest price target is $12.
Etsy (ETSY)
Etsy (NASDAQ:ETSY) has mixed reviews from analysts and is currently rated as a “Hold.” The lowest price target of $45 per share suggests another 25% drop is on the way. It’s realistic for Etsy to reach that level due to its waning growth. The firm also lacks a viable plan for changing the situation.
The e-commerce company reported a 3.7% year-over-year decline in consolidated gross merchandise sales in Q1 2024. If this metric continues to decline, Etsy won’t have a path to long-term growth. Etsy’s only way to increase its revenue is to run ads and raise fees. It’s mostly been higher fees for buyers and sellers, creating a backlash.
In the meantime, revenue increased by 0.8% year-over-year while net income decreased by $11.5 million year-over-year to reach $63.0 million. That’s a 15.5% year-over-year decline. Active sellers increased by 15.0% year-over-year, while active buyers increased by 0.9% year-over-year.
If active buyers continue to grow slowly, sellers won’t have as many opportunities. More sellers and fewer buyers can result in more sellers not making enough income to justify keeping their stores open.
On the date of publication, Marc Guberti 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.
