This market downturn has not hit all stocks equally. While the major indices are down between 20% and 35% on the year, many stocks are down 70% or more in 2022. Although it might make sense to hold onto some tried-and-true stocks through the current downturn, there are some securities that investors would be better off selling before their losses compound and meaningfully worsen. Many stocks are down not only because of macroeconomic conditions and a decline in sentiment, but also because their business model is broken, their earnings are terrible, and they are losing ground to competitors. Here are seven such stocks to sell now.
The crypto winter is real, and cryptocurrency exchange Coinbase (NASDAQ:COIN) has been suffering because of it. With the prices of leading cryptocurrencies such as Bitcoin (BTC-USD) and Ethereum (ETH-USD) down more than 70% from their all-time highs reached a year ago, many crypto enthusiasts have thrown in the towel. That phenomenon, in turn, has led to lower trading activity and transaction volumes on Coinbase’s exchange, lowering both its earnings and the price of COIN stock.
In 2022, COIN stock is down 75%, and it’s trading just under $62 a share. The stock is very far below its 52-week high of $368.90, which it hit last November when most pundits were forecasting that the price of Bitcoin would reach $100,000 or more.
But as the price of BTC has slumped, Coinbase’s earnings have imploded. In August of this year, the company reported a $1.1 billion net loss for Q2 compared with $1.59 billion of net income in the same quarter of 2021.
The company announced that it was cutting about 20% of its staff to lower its costs. But at this point, most analysts are advising investors to cut their losses and get out of the stock.
To paraphrase Charles Dickens, it was the best of stocks and now it’s the worst of stocks. In spring 2021, Boston-based pharmaceutical company Moderna (NASDAQ:MRNA) was the best performing stock in the S&P 500. From March 2020, when the pandemic began, to September 2021, MRNA stock ran up 2,038%, soaring from $21.30 to $449.38 per share. Investors who held Moderna stock throughout the development and commercialization of the company’s COVID-19 vaccine reaped massive returns.
But now the stock has suffered a brutal reversal of fortune. Since peaking in September of last year, the share price has collapsed 64%, and it now trades at $134 a share, making it one of the worst performers in the benchmark index.
The collapse of MRNA stock can be chalked up to one issue: the company does not have a strong pipeline of drugs in development beyond its coronavirus vaccine. While Moderna was one of the first companies in the world to get its Covid-19 vaccine approved, it does not have a lineup of other medications to help drive its revenue going forward. Investors should abandon this once high-flying biotech stock before things get any worse for it.
Another casualty of the crypto meltdown, financial technology (fintech) firm Block (NYSE:SQ) has been beaten up pretty badly this year amid the market carnage. The company formerly known as Square has seen its share price drop over 80% from its 52-week high of $270.16 a share. Today SQ stock changes hands at $52.
And the bottom may not yet be in for this security. The company seemed to be doing well when it was focused primarily on its Cash App payment processing system that small and medium-sized businesses seem to love.
But co-founder Jack Dorsey’s pivot to focus more on cryptocurrencies and blockchain technology was poorly timed given the market’s downturn this year and the bludgeoning of crypto asset prices. Square’s expensive rebrand into Block literally happened just as markets turned south late last year.
Now analysts are openly wondering what the future holds for digital coins and tokens and companies such as Block that have bet their futures on them. Block most recently recorded a $36 million loss on the more than 8,000 Bitcoins that its owns. Ouch!
It seems like only yesterday that Etsy (NASDAQ:ETSY) was everyone’s go-to site during the Covid-19 lockdowns. The e-commerce company that focuses on handmade products, vintage items and craft supplies, including jewelry, bags, and toys, went gangbusters during the pandemic. ETSY stock crested at $307.75 per share last November.
Now its share price has come down to $92.25. As people reemerged from Covid-19 lockdowns, the growth of Etsy has slowed considerably, leading to souring sentiment among investors.
While discussing its most recent earnings report in late July, Etsy blamed inflationary pressures for a sharp downturn of its Q2 sales volumes. The company posted a Q2 sales increase of 3% compared to 31% sales growth for all of 2021 when consumers were still sheltering at home.
Analysts have also raised concerns about Etsy’s net debt position, noting that the company has $2.3 billion of long-term debt compared with $1 billion of cash and cash equivalents. It would take a lot to turn Etsy around at this point.
Speaking of e-commerce companies that thrived during the pandemic only to implode this year, let’s now take a look at Shopify (NYSE:SHOP). The Canadian e-commerce platform’s stock went berserk during the pandemic as small-and-medium-sized businesses around the world turned to its platform and retail point-of-sales system to help move their operations online as their brick-and-mortar stores were forced to close.
In spring 2020, Shopify surpassed the Royal Bank of Canada to become Canada’s most valuable publicly traded company, boasting a market capitalization at the time of 120 billion Canadian dollars (US$87 billion).
How things have changed! Since January of this year, SHOP stock has plunged 81% to now trade at $26 a share.
The company has been scrambling to right its sinking ship. With customers fleeing in droves, Shopify has laid off more than 10% of its workforce; announced the departure of several key executives, including its chief financial officer (CFO); undertaken a 10-for-1 stock split; and switched gears to focus on the offline retail sector with electronic point-of-sale hardware that allows merchants to accept payments and monitor sales.
The company is also managing inventories at brick-and-mortar retail outlets. Despite all of its efforts, SHOP stock continues to fall.
Beyond Meat (BYND)
The idea sounded great on paper. Plant-based meat substitutes that taste just like real meat products but are healthier and better for the environment than the real thing.
For awhile, Beyond Meat (NASDAQ:BYND) seemed like it was about to become very popular with consumers and start a global trend of eating artificial-meat products.
Sadly, that has not turned out to be the case. Despite several high-profile pilot projects with restaurant chains such as McDonald’s (NYSE:MCD), and selling its fake beef, pork and chicken products in more than 80 countries around the world, Beyond Meat’s offerings have not taken off as hoped. It turns out that consumers prefer real meat.
That has led to a crisis at Beyond Meat. After the pilot project with McDonald’s fizzled and global sales of its products in grocery stores slumped, BYND stock has also taken a drubbing.
This year, Beyond Meat’s stock is down 77% at $14.65 a share. In the last 12 months, the stock has tumbled 86%.
What once seemed like the next big thing has turned into a notorious consumer product failure on the scale of New Coke and the Zune digital media player developed by Microsoft (NASDAQ:MSFT).
Last quarter, Beyond Meat reported a net loss of $97.1 million or a per-share loss of $1.53, which was much wider than the net loss of $19.7 million, or the 31 cents per-share loss, that it recorded during the same period a year earlier. Run, don’t walk, away from this stock.
Last but far from least, we come to Peloton (NASDAQ:PTON). Seen by many as the poster child for the post-pandemic meltdown of stay-at-home stocks, Peloton’s stock price has declined 90% in the past 12-months as the demand for the company’s internet-connected treadmills and exercise bikes has fallen off a cliff.
PTON stock is currently trading at $8.56 a share, down from a peak of nearly $165 per share during the depths of the pandemic. With gyms and fitness centers now reopened, people have dumped their subscriptions to Peloton’s online fitness classes in droves, leading to an earnings implosion at the New York City-based company.
Like other companies on this infamous list, Peloton is trying anything and everything to stop the bleeding. The company has installed an entirely new executive team and switched its strategy from focusing on selling treadmills and bikes to concentrating on increasing the number of consumers with monthly subscriptions to its online classes.
Peloton has also announced a deal with retailer Dick’s Sporting Goods (NYSE:DKS) to sell its equipment in Dick’s more than 850 outlets across the U.S. The company has also struck a deal to place its exercise bikes in all 5,400 Hilton (NYSE:HLT)-branded hotels in America. Despite these efforts, PTON stock continues to fall, down 23% in the last month alone.
On the date of publication, Joel Baglole held a long position in MSFT. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.