Amidst the turbulent seas of the stock market, the U.S. is facing a storm. The recent surge in December 2023 retail sales cast a shadow over the hopes of early interest rate cuts by the Federal Reserve this year. The unlikely robustness in consumer spending sent shockwaves through the market, pushing the 10-year Treasury yield to a 5-week high, now hovering over the 4.1% mark. Hence, against this grim backdrop, investors must fine-tune their portfolios by dumping the stocks to sell, as discussed in the article.
Investors need to recalibrate and optimize portfolios, which is not just advisable — it’s critical. This is a decisive moment for defensive maneuvers in the market, where caution is the watchword, and strategic selling could be key to navigating these choppy financial waters. With that said, here are three stocks to sell from your portfolios.
Zoom (ZM)
Zoom (NASDAQ:ZM) is a renowned online video conferencing platform revolutionizing global connectivity. During the pandemic, the platform emerged as a breakout success, as offices shuttered and face-to-face meetings became a relic of the pre-coronavirus era. Nevertheless, similar to other stars of the pandemic era, Zoom has grappled with post-pandemic challenges, witnessing a steep decline in its top-line growth.
While Zoom witnessed impressive net income growth, a shadow is cast by its stagnating revenue growth. Revenue ultimately sets boundaries for net income potential, which stands at 3.5% year-over-year (YoY), compared to its 5-year growth rate of 111%. Moreover, its top-line growth is 43% lower than the sector median of 6.1%. Additionally, its return on equity, on a YoY basis, is at negative 72.3%. Consequently, Tiprank’s analysts collectively rate Zoom as a Hold, with a modest average price target of roughly $76.67, reflecting restrained optimism and a wide estimate range from $60 to $100.
Carvana (CVNA)
Carvana (NYSE:CVNA) is another pandemic success story experiencing a major downturn. Despite an impressive rally, with shares soaring over 550% in the past year, the stock languishes more than 85% below its all-time high. The incredible volatility in performance highlights the topsy-turvy journey the auto retailer has undergone.
Initially excited like a tech titan, Carvana’s reality has been marred by many unprofitable quarters, much to investors’ dismay. Revenue growth YoY is firmly in the negative at -23%, compared to the sector median of 5.2%. Moreover, the company’s forward revenue growth stands at -3.7% on the back of a weakening broader market. The broader auto market isn’t faring any better, with used car prices on a downward trajectory with contracting demand. That market trend is likely to continue, further impacting Carvana’s top and bottom-line growth, signaling challenging times ahead for the company in an increasingly competitive landscape.
2U (TWOU)
2U (NASDAQ:TWOU), known for its online learning platform, made a major leap in May 2023 when it introduced two AI-powered learning assistants on its edX platform. Despite the encouraging foray into AI, 2U is navigating through turbulent waters with mounting debt costs and continuous cash burn, casting a shadow over its financial positioning. Gurufocus assigned a concerning financial strength rating of 3 out of 10, coupled with an Altman Z score of -1.21, indicating a clear state of financial distress.
The firm’s stock ownership profile further muddles the picture. With more than 90% of its shares in the hands of institutional investors, 2U faces the risks of amazing market volatility, potential overreach in corporate decisions and a skewed perception among prospective investors. On top of that, the firm stands at a critical juncture with a hefty debt load of over $750 million looming and due in early 2025. Hence, it needs major debt restructuring to stay afloat in the competitive online education market.
On the date of publication, Muslim Farooque did not hold (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.
