Identifying stocks to sell has become a critical strategy for investors, as the economy shows no signs of the slowdown that the Fed is hoping for.
The Fed is expected to keep rates as they are due to ongoing inflation and indications of a resilient economy. Demonstrating this resilience, the industrial and services sectors have grown faster than expected, which might result in further stock market volatility.
Investing in reputable companies over an extended period of time can produce significant profits. However, investors should exercise prudence with a tough summer ahead, as even robust stocks can experience downturns.
Stocks that are overexposed to these economic headwinds might not just underperform but could substantially decrease in value. With that in mind, consider these three stocks to sell.
AMC Entertainment (AMC)
The massive meme stocks rally caused several stocks to see major price surges recently. Amidst this, AMC Entertainment (NYSE:AMC) got the short-squeeze treatment too. However, the rise from this short squeeze seems destined to fade quickly. Even with these occasional bumps, AMC stock has plummeted, losing 89% of its value in the past one year.
Moreover, AMC’s revenue in the first quarter of 2024 dropped to $951.4 million, a $3 million decrease annually. Furthermore, the company’s adjusted EBITDA plunged to a deeper loss of $31.6 million, marking a 545% decline from the previous year.
On top of that, AMC faced a net earnings loss of $163.5 million, coupled with an alarming long-term debt burden of around $4.5 billion. If its revenue does not improve, servicing this debt could become a huge problem in the future.
Notably, a recent Bloomberg report underscores the ongoing struggle, as movie ticket sales in the U.S. and Canada continue to lag behind pre-pandemic levels, hindering any potential recovery for theater chains. Considering this, the financial outlook just doesn’t look good for AMC.
Etsy (ETSY)
While it’s true that the e-commerce trend isn’t fading away, let’s shift our focus to Etsy (NASDAQ:ETSY). This e-commerce platform for handmade goods reached its zenith during Covid-19, much like its industry peers. Yet, it has been difficult to regain investor confidence with a post-pandemic slowdown in demand. Additionally, it’s struggling to sustain last year’s financials, as evident by the 24% decline in shares this year and a daunting 63% dip over the previous three years.
The latest blow came with Etsy’s Q1 2024 results, which offered no encouragement. Consolidated gross merchandise sales plummeted by 3.7% year-over-year (YOY). The continued declines in GMS forced Etsy to raise its fees if it wants to boost revenue and profits. However, those same fee hikes could prevent users from engaging with its platform.
Furthermore, Etsy’s valuation appears to be higher than its predicted growth. The company is trading at about 28x forward GAAP earnings, but its expected top-line growth is barely 6% per annum.
Lucid Motors (LCID)
The electric vehicle sector has faced multiple roadblocks, leading traders to reassess their stakes in riskier stocks. Among these stocks to sell, Lucid Motors (NASDAQ:LCID) is at the forefront. Its stock price has nosedived by a staggering 63% over the past year, indicating a sharp downturn in its prospects.
Adding to Lucid’s woes, the 2023 financial results are dire, with the company facing operating losses exceeding $3 billion. Concurrently, it incurred losses exceeding $100,000 per car on a gross-margin basis.
Transitioning to Q1 2024, Lucid’s revenue missed projections by $9.74 million and its earnings-per-share (EPS) lagged behind estimates by five cents. Additionally, Lucid has grappled with a significant cash burn, losing around $715 million in this quarter alone. Its financial hardship needs regular cash infusions to keep operations running.
Amid these struggles, Lucid lowered its previous prediction of 90,000 EVs by 2024 to just 9,000 this year, raising severe doubts about its ability to meet demand.
On the date of publication, Nabeel Bukhari 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.
