Markets are back in the swing of things, as last week’s close marked a 7% surge since October’s low. Though investors are thankful for these Thanksgiving stocks, you should still trim these turkeys from your portfolio.
As the saying goes, a rising tide lifts all boats. Likewise, some of these turkeys saw a hefty share boost in recent weeks, which might make hopeful investors bullish on their prospects. But don’t be fooled. Each of these stocks has material, financial, or fundamental weaknesses that limit their long-term potential. Realistically, you should take advantage of recent per-share pricing to exit a position as quickly as possible. But, if you don’t hold these stocks to sell before Thanksgiving, avoid them at all costs.
Children’s Place (PLCE)
Children’s Place (NASDAQ:PLCE) is one of retailer’s biggest losers. That’s saying a lot, considering household budgets and discretionary spending still haven’t broken their downward momentum. Still, some retailers like Target (NYSE:TGT) adapted to shifting winds, posting profit increases by trimming expenses to make up for slackened sales.
But it seems PLCE didn’t get the memo. Last week an abysmal earnings report sent shares tumbling nearly 20%. But there’s still a substantial downside for this turkey, and investors should put it high on their list of stocks to sell before Thanksgiving.
PLCE’s retail sales fell nearly 7.3% over the quarter. Worse yet, the company’s gross profit dropped nearly $15 million between quarters, with its gross margin falling slightly more than 1%. Worse yet, the company’s holiday shopping forecast isn’t strong enough to reassure investors. In the earnings call, management said they’re projecting single-digit sales increases for 2023’s final quarter. Retail stocks like PLCE live and die by business cycles buffeted by strong holiday sales. If management expects such a slim bump to the company’s bottom line, I don’t see this turkey turning itself around in 2024.
Stocks to Sell Before Thanksgiving: Coinbase (COIN)
Coinbase’s (NASDAQ:COIN) trading volume is in the gutter, pointing to widespread concerns that the crypto exchange platform can’t generate enough user activity to sustain its previous trajectory. A quick look at the company’s volume chart puts current user activity near all-time lows. For a firm as dependent upon trading fees as Coinbase, losing users to one of many competitors points to troubling signs ahead for this stock to sell before Thanksgiving.
Investors, noting Coinbase’s steep competition and falling market share, are hinging their hopes on a series of planned Bitcoin (BTC-USD) panning out. Several institutions already use or plan to use Coinbase as the primary asset custodian if a Bitcoin ETF pans out. But ongoing SEC deliberation points to little momentum on that front, and Coinbase’s prospects could fizzle with the stroke of the pen from regulators.
Ultimately, Coinbase’s best long-term plan focuses on customer retention. But as volume falls more than 50% year-over-year and stocks take center stage in retail portfolios again, don’t expect a Thanksgiving miracle.
GrowGeneration (GRWG)
Don’t expect this cannabis stock to go much higher in the coming months. GrowGeneration (NASDAQ:GRWG) is facing falling demand for its hydroponic growing solutions as its revenue fell 21% year-over-year in its most recent report. The company’s margins improved as it sought cost-cutting initiatives, but that won’t be enough to save this turkey of a Thanksgiving stock.
That’s because the company’s cost-cutting includes widespread store closures. GrowGeneration closed six retail outlets in the previous quarter, with plans to close another six this quarter. Rapid and sequential store closures might juice margins in the short-term but rarely bode well for long-term growth and sustainability. Look no further than 2023’s biggest loser, Bed Bath & Beyond, which saw store closures snowball. Management’s hope is that they will “retain the key customers from consolidated locations on a revenue basis” and “reduce our in-store inventory levels [to] ensure quicker deliveries.”
I don’t know about you, but that plan doesn’t exactly point to bullish prospects for this cannabis stock.
Stocks to Sell Before Thanksgiving: Blink Charging (BLNK)
Electric vehicle charging stocks had an interesting few weeks. The industry leader, ChargePoint (NYSE:CHPT) reported less-than-stellar earnings which rocked the entire sector. Somehow, though, Blink Charging (NASDAQ:BLNK) came out ahead and returned nearly 50% over the preceding month. But, while long-term prospects for competitors like CHPT remain to be seen, Blink Charging doesn’t hold enough juice to make it to the winner’s platform.
Building a charging infrastructure is a costly endeavor. To Blink’s credit, they haven’t leveraged debt as much as others have. But that might be changing. The company’s debt-to-equity ratio increased over the past three quarters and nearly doubled since last year. At the same time, the company’s cash is rapidly dwindling. In Q3, the company held just $66 million in cash, down more than 50% from where they started the fiscal year.
The company posted a $17 million cash burn for the same quarter. That puts the company on pace to burn $68 million over the next year, assuming they can keep costs down. This points to one of two scenarios if Blink is to stay solvent: issue equity and dilute shareholders (if they can find willing buyers) or further increase the company’s debt load. Neither one indicates any upside from here.
Affirm Holdings (AFRM)
Affirm Holdings (NASDAQ:AFRM) might see a short-term holiday bump, but this turkey’s Black Friday benefits don’t outweigh its long-term losing status. This assessment might seem strange, considering the company just posted a massive revenue beat. But looking under the hood, we see that Affirm is in a precarious position that might soon flip.
For better or worse, Affirm’s “buy now, pay later” model targets the riskiest borrowers as credit requirements for this type of loan are lower than even the highest APY credit card. But, across lending sectors, signs point to trouble. Credit card delinquencies (failure to pay) are surging. Commercial banking consumer loans are following the same trajectory. Car payment defaults just hit a 29-year high. The riskiest borrowers are usually the first to default on debt, and that consumer segment also comprises Affirm’s core customer base.
Likewise, Affirm’s 30+ day delinquency rate is climbing. The company’s earnings presentation uses some obscuration tactics to hide the extent of the issue, i.e., by excluding “pay in 4” and Peloton (NASDAQ:PTON) loans. But, no matter how you slice it, Affirm’s delinquencies are rapidly gaining ground on past highs. Combine that with increased consumer utilization over the holidays and widespread delinquencies among the riskiest borrowers, and Affirm investors don’t have much to be thankful for this Thanksgiving.
Stocks to Sell Before Thanksgiving: Robinhood Markets (HOOD)
Like Coinbase, Robinhood Markets (NASDAQ:HOOD) is seeing its trading volume fall off a cliff. The company posted a 13% year-over-year revenue decline in its recent earnings report. The dip came from slackened trading volume as users either trade less (possible) or pivot to one of many competitors (more likely).
To that end, Robinhood is pivoting hard into financialization. Last week, the company’s CEO touted Robinhood’s uninvested cash yield (5%). Likewise, he decried customers “getting ripped off by these traditional financial institutions.” While that may be true, pivoting into the competitive waters of yield maximization won’t be the cure-all hopeful investors might think it is. Fintech companies like SoFi Technologies (NASDAQ:SOFI) offer equally competitive yields with a host of consumer banking and lending solutions to boot.
We have to assume Robinhood’s angle is to capture cash with the promise of yield and hope consumers will then get itchy fingers and trade with their deposits. But that doesn’t seem likely, as 5% yield is solid in its own right. At the same time, with current 3-month yields sitting at 5.5%, Robinhood won’t be making much money off the difference between deposits and Treasurys.
Citigroup (C)
Citigroup (NYSE:C) is ready to lay off thousands of workers – just in time for the holidays. It sounds like something the villain would do in a classic Christmas movie, but it’s happening. If that isn’t enough to sour you on this Thanksgiving turkey, a quick look at its financials set it apart from stocks to sell before Thanksgiving.
Across the board, analysts are bearish on Citi’s prospects. Statements include “[it’s] not worth waiting around for this historical value trap,” and “Citigroup’s returns will remain structurally lower than peers, revenue growth will be lower than peers, and there remains room for negative surprises on expenses.” Neither sounds too good, especially considering the competitive landscape Citigroup finds itself in.
Though Citi posted solid revenue growth in recent quarters, many expect that rate to slacken amid competition and higher interest costs. Ultimately, it’s best to look at what a company does rather than what it says. And Citi’s actions – firing thousands of workers before the holidays – says enough to cement its uncertain position moving into 2024.
On the date of publication, Jeremy Flint held no positions in the securities mentioned. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.