Wall Street PR

Company

Customize Consent Preferences

We use cookies to help you navigate efficiently and perform certain functions. You will find detailed information about all cookies under each consent category below.

The cookies that are categorized as "Necessary" are stored on your browser as they are essential for enabling the basic functionalities of the site. ... 

Always Active

Necessary cookies are required to enable the basic features of this site, such as providing secure log-in or adjusting your consent preferences. These cookies do not store any personally identifiable data.

No cookies to display.

Functional cookies help perform certain functionalities like sharing the content of the website on social media platforms, collecting feedback, and other third-party features.

No cookies to display.

Analytical cookies are used to understand how visitors interact with the website. These cookies help provide information on metrics such as the number of visitors, bounce rate, traffic source, etc.

No cookies to display.

Performance cookies are used to understand and analyze the key performance indexes of the website which helps in delivering a better user experience for the visitors.

No cookies to display.

Advertisement cookies are used to provide visitors with customized advertisements based on the pages you visited previously and to analyze the effectiveness of the ad campaigns.

No cookies to display.

3 Doomed Tech Stocks to Dump Before They Dive: February 2024

Date:

There are some doomed tech stocks to sell amid the broader indices, like the Nasdaq, heading lower. These companies face a myriad of challenges that make them risky investments.

Investors need to reevaluate their portfolios and identify companies with fundamental issues that may not weather the storm of what could be a dicey bear market sometime in the middle of this year.

So, here are some doomed tech stocks that investors should consider removing from their portfolios.

Snap (SNAP)

The Snapchat (SNAP) and Instagram apps on displayed on an iPhone, which sits on a gray background.

Source: BigTunaOnline / Shutterstock

Snap (NYSE:SNAP) has been recommended as a sell here before on InvestorPlace due to its significant cash burn and a substantial net loss reported in the third quarter of 2023. The revenue growth rate was modest at 5% year-over-year, which is considered inadequate given the company’s valuation and ongoing struggle to narrow net losses.

I feel there are some serious problems at SNAP, making it one of those doomed tech stocks to sell. Namely, the company has faced criticism for its high reliance on stock-based compensation and the intense competition it faces from other social media platforms like TikTok.

Another issue is that SNAP fired around 10% of its workforce in recent months. Surely, a large part of the reason is due to the company burning through millions in cash within the last 12 months.

Due to these reasons and more, SNAP is rated as a Hold by Wall Street. It should also be noted that this recommendation comes with a 24% predicted decrease in its stock price, making holding the stock questionable and much more of a Sell.

Chegg (CHGG)

Chegg (CHGG) logo on the company's web page magnified by a magnifying glass

Source: Casimiro PT / Shutterstock.com

Chegg (NYSE:CHGG) has faced significant challenges due to the rise of generative AI applications like ChatGPT. So far, its plan to add value in areas these tools cannot have proven unsatisfactory to my tastes.

CHGG is also diving headfirst into AI, by necessity, and its impact has hurt the company. Its topline last year faced a 7% year-over-year decline in total net revenues, coming in at $716.3 million.

The company is attempting to pivot fast, but I remain skeptical it will be able to pivot fast enough and provide enough value to users that they can’t already from the expansive use cases of LLMs. That is further reflected in its $34.2 million impairment charge in 2023 for the restructuring of its business, and a 6% year-over-year decrease in subscription services subscribers to 7.7 million.

CHGG was never meant to be a company that leaned so heavily on AI. But it’s now being dragged into this industry in a do-or-die scenario that could end tragically. Also, due to being taken out of its comfort zone, there are increased execution risks for CHGG to redefine its business model to stop the churn of its subscribers. So far, that’s looking like an unsuccessful effort.

Nvidia (NVDA)

Nvidia corporation (NVDA) logo displayed on smartphone with stock market chart background. Nvidia is a global leader in artificial intelligence hardware.

Source: Evolf / Shutterstock.com

Nvidia (NASDAQ:NVDA) has many forks in the fire for delivering growth to investors, ranging from AI to quantum computing, and blockchain. The company seemingly does it all.

But at some point, as with all companies, there comes a point where the company’s valuation becomes too much to handle. The company has a $1.65 trillion market cap at the time of writing and it’s expected to reach $95.30 billion in revenues with an EBITDA margin of around 50%.

Granted, those earnings and revenue multiples are some of the best in the Magnificent 7, but for it to have a $1.65 trillion cap means investors are also pricing in a very long time horizon of growth for that valuation to make sense. Investors are valuing Nvidia at roughly 18 times its expected revenues. So, the question is: Is NVDA’s revenue growth rate going to continue like this in the future?

Given that we’re at the very earliest stages of the AI revolution, and thus most susceptible to hype, I think it’s reasonable to say those expectations are quite optimistic. I compare today’s bullishness on AI to 2020’s love for all things blockchain, speculating that Bitcoin (BTC-USD) would replace central banks.

As far as I can see, institutions aren’t going anywhere, but in the far future perhaps that idea may be feasible.

On the date of publication, Matthew Farley did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Matthew started writing coverage of the financial markets during the crypto boom of 2017 and was also a team member of several fintech startups. He then started writing about Australian and U.S. equities for various publications. His work has appeared in MarketBeat, FXStreet, Cryptoslate, Seeking Alpha, and the New Scientist magazine, among others.

Go Source

Chart

SignUp For Breaking Alerts

New Graphic

We respect your email privacy

Share post:

Popular

More like this
Related

2025 QuantNet Ranking of Best Financial Engineering Programs

Your Privacy When you visit any website it may use...

AI Enthusiasm Redux

Your Privacy When you visit any website it may use...

AI Enthusiasm, Robust Earnings Drive Stocks to Records: Jan. 22, 2025

Stocks are jumping toward fresh all-time highs as investors...

VC Firms – Who and What Are They?

Well-known companies like Google, Apple, and many others had...