It has been a few volatile weeks for U.S. equities. After ending the first quarter of 2024 with significant gains, the S&P500 and Nasdaq posted some of their worst months in a while in April. These major indices fell 2.63% and 2.42%, respectively. This dip has led to investors reevaluating their portfolios to consider if there are any stocks they will want to sell now.
Macroeconomic environment and the structural conditions within the market continue to make certain stocks untenable investments in the near and medium-terms. For one, trading multiples of U.S. equities in general are still pretty frothy. The macroeconomic data in coming weeks could still point to higher-than-expected inflation, placing bets on near-term Federal Reserve rate cuts further in doubt. Moreover, the U.S economy appears to be slowing based on recent Q1 data.
With that said, below are three sinking stocks to sell now as the market remains volatile.
SentinelOne (S)
The cybersecurity space has been some of the most afflicted in terms of broader macroeconomic machinations. While many enterprises have moved a lot of data and services to the cloud, these same businesses have, in turn, demanded a holistic approach to cybersecurity. Cybersecurity stocks posted amazing returns in 2020 and 2021 for this very reason. The macroeconomic environment, unfortunately, has made enterprises to think twice about allocating costs to the implementation of new cloud security software.
This is where SentinelOne (NYSE:S) comes in. The cybersecurity firm’s “Singularity Extended Detection and Response Platform” leverages artificial intelligence to power cybersecurity solutions for an enterprise’s cloud network. Unfortunately, macroeconomic uncertainty has created headwinds for SentinelOne’s top-line growth, which slowed dramatically from triple-digit growth in 2021 and 2022 to mid-double-digit growth in 2023.
SentinelOne’s share price has fallen 16% on a year-to-date basis. Increased competition from dominant cybersecurity player CrowdStrike (NASDAQ:CRWD) could lead to further losses.
Tesla (TSLA)
Recent news of Elon Musk’s trip to China and subsequent tentative approval of the Tesla’s (NASDAQ:TSLA) autonomous system caused the electric vehicle (EV) maker’s shares to rally 15% on April 29. Ultimately, Tesla will be able to improve operating margins a few percentage points, which is the implication that sparked the rally. However, waning demand in the global EV market still spells trouble for Tesla in the medium and long-term.
Elevated interest rates have created a waning demand environment for new vehicles, combustion engine and electric. First quarter Tesla earnings results missed revenue, gross margin, and profit estimates, underscoring the difficulty of the automotive selling environment.
Tesla shares have fallen 25% on a year-to-date basis. Once investors refocus on the downward spiraling EV market environment, TSLA shares could receive even more pressure. And, solidifying Tesla’s position as one of the stocks investors will want to sell now.
Apple (AAPL)
iPhone maker Apple (NASDAQ:AAPL) recently released its Q2 2024 earnings. And, despite various data points showing Apple’s decline in China, the tech giant remained optimistic on its long-term outlook. This optimism coupled with the largest share buyback program in the company’s history, $110 billion, sent shares soaring.
Let’s first tackle the shareholder buyback point. When a company repurchases shares from shareholders, it’s usually at a premium to the current stock price and investors are satisfied. However, it’s important to note while these buybacks are great for large shareholders, benefits for smaller shareholders are minimal in comparison. In other words, retail investors may get a short-term boost in the value of their investment once a share buyback program is announced, but a lot of the gains are going to go to the big fish.
The market’s positive reaction to Apple’s earnings announcement is also puzzling for other reasons. Apple’s top-line figures still declined 4% on a year-over-year basis with iPhone sales falling 10%. The optimism that Apple’s management announced doesn’t seem grounded in the reality of the data coming out of China these days. As Bloomberg points out in an article, a number of independent industry research do not point to anything optimistic.
Huawei’s continued rise will create additional headwinds for the iPhone maker. It just seems CEO Tim Cook’s optimism should be taken with a grain of salt and nothing more.
On the date of publication, Tyrik Torres 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.
