It has been a bruising year for tech stocks. But not all tech securities are equal. Some have fared much better than others.
The current market downturn has exposed many technology companies that have not been able to live up to the hype surrounding them. It has also brought far lower the shares of many technology companies that thrived during the pandemic when the entire world was forced online. Many high-flying tech stocks are down 80% or more this year and continue to slide lower as investors abandon them.
While the carnage has been uneven, it has definitely served to separate the wheat from the chaff when it comes to the best technology stocks to own. Here are seven tech stocks to sell right now, along with one to consider buying.
|WBD||Warner Bros. Discovery||$11|
Tech Stocks to Sell Right Now: Chewy (CHWY)
This dog has fleas. While online pet retailer Chewy (NYSE:CHWY) went gangbusters during the pandemic, it has been some time since the company’s share price was trending upwards. In 2022, the stock is down 30%, bringing it to $41 a share. Over the past 12 months, the share price has declined 45%, and it is now 65% below its all-time high of nearly $120 reached in February 2021.
While CHWY stock has inched a little higher in recent months, investors shouldn’t be fooled by this stock. Despite its steep decline, Chewy’s shares are still very expensive, trading at 500 times analysts’ average forward earnings estimate for it.
The company most recently partnered with insurance-technology company Lemonade (NYSE:LMND) to offer pet insurance to consumers, but there’s no telling how that deal will impact Chewy’s future earnings. In its most recent reported quarter, Chewy reported that the number of its active users had fallen year-over-year.
Zoom Video Communications (ZM)
Zoom Video (NASDAQ:ZM) kind of saved the world in 2020. As the pandemic hit and work and education moved online, people all over the world flocked to Zoom’s online video-conference service. This led to explosive and immediate growth by the San Jose, California-based company, and it made ZM stock a darling of the pandemic era. Between March and October 2020, Zoom’s share price rose 432% to a peak of $559 a share. Sadly, that was then and this is now.
ZM stock today is changing hands at $82 a share, a decline of over 85% from its all-time high. As the pandemic ebbed and we became less dependent on remote work and learning, investors’ interest in Zoom Video Communications fell sharply.
And despite the steep decline, Wall Street analysts continue to urge shareholders to dump the stock before things get even worse for ZM. While the company continues to innovate and tries to find new revenue streams (most recently, it announced a partnership with Tesla (NASDAQ:TSLA), this tech company’s heyday appears to be in the recent past.
Teladoc Health (TDOC)
Speaking of stocks that were pandemic winners, how about Teladoc Health (NYSE:TDOC)? The New York-based telehealth company that facilitates online consultations between doctors and patients promised to revolutionize medicine as we know it. And the company looked like the perfect stock to own during the Covid-19 pandemic. Like the aforementioned CHWY and ZM, TDOC stock enjoyed a spectacular run from March 2020 until early 2021, when its share price peaked at just under $300.
Today TDOC stock is trading at 30 bucks, down 90% from its all-time high. So far this year, its share price has plunged nearly 70%.
Not only has the stock suffered as the economy reopened and we returned to in-person doctor appointments, but the company is also burdened with a lack of profitability, most recently reporting a Q3 loss of $73.5 million. On a per-share basis, Teladoc lost 45 cents. TDOC is definitely a technology stock to sell right now.
Peloton (NASDAQ:PTON) is perhaps the quintessential pandemic stock. The New York City-based company that makes internet-connected treadmills and exercise bikes shot up like a rocket during the pandemic when public gyms and fitness centers were closed and people were forced to exercise from home. But the company and its share price have since crashed and burned in spectacular fashion.
Over the past 12 months, PTON stock has fallen by 80% to trade at $10.88. It’s a far cry from the $165 a share that it had reached during Christmas 2020 when Peloton’s bikes and treadmills were very popular gifts.
With the pandemic receding and Peloton’s growth slowing, a number of Peloton’s top executives, including its CEO, left the firm, which has since embarked on a reorganization that has yet to produce a real turnaround for the company or its stock.
Peloton most recently provided weak guidance for its current quarter, which includes the typically robust holiday sales period. That came after the company reported a third-quarter per-share loss of $1.20. That was 88% greater than the 64-cent loss per share that Wall Street analysts, on average, had expected the company to report.
There are definitely good reasons to include Peleton on this list of tech stocks to sell.
Tech Stocks to Sell Right Now: Warner Bros. Discovery (WBD)
Streaming is a tough game, and it’s getting tougher. The competition in the sector is only getting stiffer as a growing number of media and entertainment companies secure the rights to their content and launch their own streaming platforms. Enter into the gladiator ring Warner Bros. Discovery (NASDAQ:WBD), a company that was created this past April when AT&T (NYSE:T) spun off Warner Bros. and Warner Bros. joined forces with the Discovery television network.
On paper, the combination of Warner Bros and Discovery looked great. The merger brought together the Warner Bros. movie studio and DC Comics, along with the TV networks CNN and HBO. Discovery’s reality TV programming includes popular shows such as Gold Rush and Deadliest Catch, among others. Understandably, hopes were running high when WBD stock debuted at just under $25 in April.
In 2022, however, Discovery’s share price has declined 53% to $11. Investors and analysts are concerned about a slowing advertising market and the need for Warner Bros. Discovery to spend heavily on content over the next few years.
WarnerBros Discovery CEO David Zaslav recently revealed that HBO had lost $3 billion in 2021 after spending $7 billion on content. Ouch.
Affirm Holdings (AFRM)
Buy now, pay later had a moment, albeit a brief one. The deferred-payment arrangement seemed to be on the cusp of becoming the “next big thing” when regulators, politicians and industry analysts started asking questions about the way it traps consumers in a debt cycle. High inflation, rising interest rates and a slowing economy seemed to throw more cold water on buy now, pay later. Today the financing vehicle is barely mentioned in the media.
That may help to explain why San Francisco-based Affirm Holdings (NASDAQ:AFRM) is down 90% over the past 12 months, including an 84% decline this year. At $15, the shares are trading at a fraction of the $165 they were at in November 2021. Beyond consumers and investors souring on buy now, pay later, AFRM stock has also been brought lower by several of the most common problems that afflict technology companies – a lack of profits, missed earnings and slumping forward guidance.
For Q3, Affirm Holdings once again missed analysts’ average forecasts for its earnings and issued softer-than-expected revenue guidance, leading many on Wall Street to wonder where the bottom is for this crumbling tech stock.
Coinbase Global (COIN)
Where to start with crypto? The entire industry appears to be in crisis following the $8 billion implosion of cryptocurrency exchange FTX and the downfall of the one-time digital wunderkind Sam Bankman-Fried. As the fallout from the FTX debacle intensifies, the crypto winter seems to be entering an ice age with investors fleeing digital coins and tokens en masse. We seem a long way from when cryptocurrencies were being hawked by celebrities such as Matt Damon and Tom Brady, and billed as “digital gold” and a “hedge against inflation.”
In the midst of the carnage is publicly traded crypto exchange Coinbase (NASDAQ:COIN). The company, led by CEO Brian Armstrong, has seen its share price crater over 80% this year to $48.15 as mounting skepticism about the value of blockchain technologies leads users to flee COIN’s platform in droves.
The company recently reported that it had 8.5 million monthly transacting users during Q3, down from 9.2 million users at the start of the year. Coinbase’s Q3 loss amounted to $545 million. Everybody should definitely put COIN on their lists of tech stocks to sell.
One Tech Stock To Buy Right Now: Microsoft (MSFT)
Seattle-based Microsoft (NASDAQ:MSFT) is the type of blue-chip technology stock that investors can feel good about. Founded by Bill Gates and Paul Allen in 1975 and publicly traded since March 1986, Microsoft today is a well diversified and battle-tested technology company that is involved in everything from computer software and video games to online search and cloud computing. The company is hugely profitable and generates positive cash flow, while its stock has been a consistent winner for shareholders over the years.
While MSFT stock is down 27% this year, it is up nearly 200% over the past five years and has gained 830% since November 2012. Today Microsoft has a market capitalization of nearly $2 trillion, a reasonable price-earnings ratio of 26, and is one of the few mega-cap tech stocks that actually pays shareholders a quarterly dividend.
While the company has not been immune to the economic headwinds afflicting the global economy this year, it remains one of the tech giants best positioned to weather the storm and come out stronger on the other side.
Currently trading at just over $240 a share, investors should take the opportunity to buy the dip of MSFT stock.
On the date of publication, Joel Baglole a held long position in MSFT. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.