Selecting stocks to sell has become an urgent priority for those investors who want to cash out before the expected recession hits hard. Investors are wary of further declines to come in this bear market. The benchmark S&P 500 index is down around % year-to-date (YTD). Meanwhile, the sell-off in growth stocks led to a 30% decline in the Nasdaq 100 index so far in 2022.
The U.S. Department of Commerce recently announced the first-quarter gross domestic product (GDP) declined at a 1.5% annual pace. David Folkerts-Landau, the chief economist at Deutsche Bank (NYSE:DB), forecasts a severe recession in the U.S. within the next two years. Last month, the chief economist at Moody’s (NYSE:MCO) also noted that recession risks have become “uncomfortably high.”
Against this backdrop of an imminent recession, we have selected stocks recently downgraded by analysts forecasting restrained demand in their businesses. With that information, here are seven stocks to sell before they plunge further into the abyss.
| BBY | BestBuy | $69.79 |
| COIN | Coinbase Global | $53.27 |
| EBAY | eBay | $43.34 |
| NFLX | Netflix | $179.31 |
| RBLX | Roblox | $31.88 |
| VLTA | Volta | $1.69 |
| ZEN | Zendesk | $57.86 |
Stocks to Sell: Best Buy (BBY)
52 week range: $67.66 – $141.97
Best Buy (NYSE:BBY) is the largest pure-play consumer electronics retailer in the U.S., with $51.8 billion in fiscal 2022 sales. The retailer announced first-quarter FY23 results on May 24.
Revenue decreased 8.5% year-over-year (YOY) to $10.65 billion. Non-GAAP earnings came in at $1.57 per diluted share, compared to $2.23 per diluted share a year ago. Cash and equivalents ended the period at $960 million.
Wall Street was not pleased revenue declined for the second straight quarter due to increased promotional activity and rising supply chain expenses. Moreover, same-store sales fell 8% YOY, while inventories grew 9%, putting more pressure on the bottom line. Management forecasts comparable store sales to decline between 3% to 6% through 2022.
In recent days, Best Buy got a downgrade from Bank of America (NYSE:BAC). So far in 2022, BBY stock has dropped over 30% to trade at 2-year lows. However, we should note that the dip in the stock price has lifted the dividend yield to an attractive 4.9%.
Coinbase Global (COIN)
52-week range: $40.83 – $368.90
Coinbase Global (NASDAQ:COIN) is one of the largest cryptocurrency exchanges in the world. Its platform has roughly 89 million verified users in over 100 countries.
The brokerage released Q1 metrics on May 10. Revenue declined 27% YOY to $1.17 billion. Net loss came in at $1.98 per diluted share, compared to a net income of $3.05 per diluted share a year ago. Cash and equivalents ended the period at $6.1 billion.
Coinbase is firing roughly one-fifth of its workforce to cut down costs, yet it may not be enough to compensate for declining revenue. While the cryptocurrency exchange still has significant cash on its balance sheet to absorb further losses, the company is expected to take more radical measures if the crypto meltdown deepens.
On Nov. 9, 2021, Coinbase shares saw a record high of $368.90. But, recently, JPMorgan Chase (NYSE:JPM) downgraded COIN stock, which has plunged 80% YTD.
Stocks to Sell: eBay (EBAY)
52-week range: $40.52 -$81.19
eBay (NASDAQ:EBAY) is one of the largest e-commerce marketplaces worldwide, with $87 billion in 2021 gross merchandise volume (GMV). Its platform connects more than 147 million buyers and roughly 20 million sellers.
The global commerce company reported Q1 results on May 4. Revenue decreased 6% YOY to $2.5 billion. Adjusted earnings came in at $1.05 per diluted share, down from $1.08 a year ago. Cash and equivalents ended the period at $6.3 billion.
eBay’s business continues to shrink at an accelerated pace. Its buyer pool declined by 13%, and sales volumes on its platform fell 20% in the first quarter. As a result, management lowered its 2022 outlook, anticipating adjusted earnings between $3.90 and $4.11 per share.
On June 10, Goldman Sachs (NYSE:GS) lowered its forecast for EBAY stock. So far in 2022, shares have lost over 36% to trade at 2-year lows.
Netflix (NFLX)
52-week range: $162.71 – $700.99
Netflix (NASDAQ:NFLX) offers subscription-based entertainment services worldwide in 190 countries. The streaming giant issued Q1 financials on April 19.
Revenue increased 9.8% YOY to $7.9 billion. Diluted earnings came in at $3.53 per share, down from $3.75 per share a year ago. Free cash flow stood at $802 million. Cash and equivalents ended the quarter at $6 billion.
The platform faces increased competition while demand for streaming entertainment keeps falling. As a result, it lost 200,000 subscribers in the first quarter and could lose two million more in the second quarter. In addition, rivals are ramping up their content, forcing Netflix to keep its content expenditures at high levels.
Since its Q1 earnings, Wall Street has issued numerous warnings about the future of NFLX stock. The latest downgrade came from Matthew Harrigan of Benchmark. Since January Netflix shares have tumbled over 70% YTD, trading around multi-year lows.
Stocks to Sell: Roblox (RBLX)
52-week range: $21.65 – $141.60
Roblox (NYSE:RBLX) is known for its interactive entertainment platform. Developers can integrate digital games and user-generated experiences in immersive 3D worlds.
Management announced Q1 financials on May 10. Revenue increased 39% YOY to $537.1 million. Net loss came in at 27 cents per diluted share, down from 46 cents a year ago. Cash and equivalents ended the period at $3.13 billion.
The slowdown in user engagement resulted in a decline in quarter-to-quarter revenue. In April, average bookings per daily active user declined 25.5% YOY.
A decline in bookings typically leads to a slowdown in near-term revenue. Purchases of Robux, its in-game currency, are measured as bookings, which translate into revenue when players spend their Robux in its app.
Investors have become increasingly concerned after the most recent downgrade by Goldman Sachs. RBLX stock has crashed 75% YTD, trading close to its 52-week lows.
Volta (VLTA)
52-week range: $1.44 – 14.34
Electric vehicle (EV) charging station operator Volta (NYSE:VLTA) has been trying to capitalize on the growth of alternative energies. Management partners with retailers to provide advertising on its charging stalls with large display monitors.
On May 13, Volta released Q1 metrics. Revenue increased 77% YOY to $8.4 million, driven by a 73% increase in media revenue. However, net loss came in at 28 cents per diluted share, down from $4.15 a year ago. Cash and equivalents ended the period at $205.4 million.
Management remarked that there is “substantial doubt” about the company’s ability to continue for the next 12 months, given its financial position. Moreover, the departure of its top-level executives adds further uncertainty to the company’s future.
VLTA stock is facing the threat of delisting from the New York Stock Exchange, as it has been trading significantly below $4 per share since late March.
In June, Cantor Fitzgerald downgraded Volta. So far in 2022, VLTA stock has plunged 80% to trade at 52-week lows.
Stocks to Sell: Zendesk (ZEN)
52-week range: $54.16 – 153.43
Zendesk (NYSE:ZEN) provides a portfolio of customer engagement software solutions. The company reported Q1 results on April 28.
Revenue increased 30% YOY to $388.3 million. Net income came in at 12 cents per diluted share, down from 18 cents a year ago. Cash and equivalents ended the period at $496.9 million.
Wall Street has not been happy with the failed attempt to buy Momentive Global (NASDAQ:MNTV). Then came Zendesk’s recent rejection of an acquisition offer from a consortium of private equity firms for $16 billion. As a result, investor confidence has been shaken.
Morgan Stanley (NYSE:MS) has recently downgraded ZEN stock, which is down 45% YTD. Shares are trading at multi-year lows.
On the date of publication, Tezcan Gecgil 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.