Wall Street enjoyed a relief rally during the summer. However, over the past month investors’ sentiment has once again changed. As a result, Americans are increasingly focused on picking stocks to sell while they brace for more volatility ahead.
The S&P 500 has lost 16.5% in 2022. Meanwhile, the Nasdaq 100 index is still in bear-market territory, down nearly 25% so far this year.
Market participants are trying to determine what the Fed will do and the consequences of its actions. The debate centers around whether the central bank’s fight to contain inflation will badly damage the U.S. economy in the near term. Meanwhile, investors continue to be worried about the war in Ukraine.
According to JPMorgan Chase (NYSE:JPM) CEO Jamie Dimon, a recession, or even “something worse,” could be coming. He suggested that the Fed’s monetary policies, Russia’s invasion of Ukraine, and rising oil prices could continue to create significant challenges for stocks.
Against this backdrop, here are seven stocks to sell. They will likely struggle to navigate the choppy waters ahead.
| BYND | Beyond Meat | $21.17 |
| CIM | Chimera Investment | $8.16 |
| COIN | Coinbase Global | $76.03 |
| GPS | Gap | $9.40 |
| PENN | Penn Entertainment | $30.95 |
| HOOD | Robinhood Markets | $10.40 |
| SKLZ | Skillz | $1.27 |
Beyond Meat (BYND)
Our first stock to sell is Beyond Meat (NASDAQ:BYND), the leading producer of plant-based meat substitutes in the U.S. with a market share of over 9%.
Beyond Meat issued its Q2 financials results on Aug. 4. BYND’s revenue fell 1.6% year-over-year to $147 million. Its net loss per share widened substantially to $1.53, up from 31 cents in the same period a year earlier. Beyond Meat ended the period with cash and equivalents of $455 million.
Because rising inflation puts pressure on consumers’ purchasing power, many consumers may not be willing or able to pay a premium for plant-based meat products. In fact, BYND was forced to liquidate excess inventory in Q2, causing its gross margin to be negative in Q2.
According to one forecast, the value of the global plant-based food market will exceed $78 billion by 2028. However, fierce competition in the space will probably make it difficult for Beyond Meat to generate enough profit to justify its $1.5 billion market capitalization.
Meanwhile, the firm lowered its 2022 revenue outlook. It now anticipates sales of $470 million to $520 million, representing 1% to 12% YOY growth.
Chimera Investment (CIM)
Chimera Investment (NYSE:CIM) is a real estate investment trust (“REIT”), focusing on residential mortgage loans, asset securitization, and mortgage-related securities. CIM purchases residential mortgage loans and securitizes them, creating mortgage-backed securities.
The REIT released its Q2 metrics on Aug. 4. In Q2, its net interest income came in at $117 million, down from $307 million during the same period a year earlier. Chimera had 31 cents per share available for distribution, down from 54 cents in the same quarter a year earlier. It finished the quarter with $158.5 million of cash and equivalents.
Rising interest rates and persistent inflation create significant challenges for mortgage investors. As a result, CIM stock may come under pressure until the housing market shows clear signs of improvement. Meanwhile, increases in the number of mortgage borrowers applying for forbearance may lead to further question marks for REITs like Chimera.
As a result, CIM stock has lost 46% so far this year. The shares are changing hands for 5.9 times forward earnings and 0.6 times its book value. But not all the bad news is necessarily priced into CIM at its current levels.
Coinbase Global (COIN)
Coinbase (NASDAQ:COIN) has become one of the most well-known crypto exchanges in the world. It has 100 million verified users worldwide.
COIN released its Q2 results in early August. The firm’s revenue plunged 64% YOY to $808 million. The company posted a net loss of $4.98 per share, compared to net income of $6.42 per share a year earlier. It ended the period with $5.7 billion of cash and equivalents .
Coinbase is suffering due to the sharp decline of cryptocurrencies, which has caused the firm’s trading volumes to fall. In Q2, its trading volume declined to $217 billion, versus $462 billion in the same period a year earlier. The plunge was driven by a sharp drop in retail trading on the platform.
So far in 2022, COIN stock is down 68%. Despite the decline, unless cryptos, including Bitcoin (BTC-USD) and Ethereum (ETH-USD), stabilize, Coinbase’s shares are likely to stay volatile.
Gap (GPS)
Specialty retailer Gap (NYSE:GPS) offers a wide range of apparel, accessories, and personal-care products. Its portfolio of brands includes Gap, Old Navy, Banana Republic, and Athleta.
Gap released its Q2 financial results on Aug. 25. Gap’s revenue declined 8% YOY to $3.86 billion. The retailer’s net income, excluding certain items, plunged 89% YOY to 8 cents per share, down from 70 cents a year earlier. It ended the quarter with $708 million of cash and equivalents.
Gap’s comparable store sales declined 10%, as the sales of its Old Navy, Gap, and Athleta brands all sank. GPS attributed the slowdown partly to high inflation and supply-chain disruptions. In addition, sluggish sales in China, which is still enforcing strong, anti-coronavirus lockdowns in parts of the country, hurt the retailer’s results.
Gap’s inventories jumped 34% and 37% YOY in Q1 and Q2, respectively. As a result, the retailer is expected to resort to significant discounts to reduce its inventories. However, any steps that it takes to stabilize its comparable sales are likely to lead to further margin declines.
So far in 2022, GPS stock is down almost 44%. However, trading at 38 times forward earnings, the shares still look overvalued .
Penn Entertainment (PENN)
Penn Entertainment (NASDAQ:PENN) specializes in online sports betting and in-person gambling on casino games. It also offers online casino games.
In Q2, PENN’s revenue increased 5.2% YOY to $1.63 billion. Its EPS plunged to 15 cents, compared with $1.17 in Q2 of 2021.
Penn Entertainment has launched sports betting under the Barstool brand name to expand its reach to a younger audience. In 2020, the company signed a deal to buy a 36% stake in digital media company Barstool Sports for $163 million. Recently, Penn announced that it would purchase the remaining shares of Barstool Sports for $387 million.
Analysts are debating the extent to which the difficulties faced by American consumers will negatively affect Penn Entertainment.
PENN stock is down more than 40% in 2022, but it still can drop much further.
Robinhood Markets (HOOD)
Robinhood Markets (NASDAQ:HOOD) is hailed as the pioneer of commission-free online stock trading. The company has lured millions of retail investors to its app. Robinhood generates transaction-based revenue by routing users’ orders to market makers.
In Q2, HOOD’s revenue fell 44% YOY to $318 million. Robinhood’s net loss came in at $295 million. That was its highest loss since the start of 2021.
With equity and crypto prices plunging, the slowdown of trading activity on the company’s app caused its monthly active users (MAUs) to fall further. Last quarter, the number of clients on Robinhood’s platform decreased by 1.9 million sequentially to 14 million.
So far in 2022, HOOD stock is down 41%. Despite this sharp drop, the shares are trading at an elevated valuation of 8.6 times its sales.
Skillz (SKLZ)
Our final stock to sell is Skillz (NYSE:SKLZ). It offers a mobile eSports platform which allows users to bet on the outcome of the games played on the platform. It also pays third-party developers to create gaming content.
Last quarter, Skillz’s revenue declined 18% YOY to $73 million. Its net loss improved to 15 cents per share, versus a loss per share of 21 cents during the same period a year earlier.
The mobile eSports specialist has historically spent more money than it could afford to attract new users. However, last quarter, Skillz reduced its sales and marketing spending considerably. For instance, it decreased its spending on engagement marketing by 28% quarter-over-quarter by eliminating some ineffective programs.
Wall Street was pleased by the cost-cutting measures. However, the deceleration of its revenue growth, the significant drop in the number of its fee-paying monthly active users, and increased competition from its rivals hae made many investors more worried about the future of SKLZ stock. Management lowered its 2022 revenue guidance to $275 million.
SKLZ stock has tanked 82% in 2022, but it can still decline much further
On the date of publication, Tezcan Gecgil, Ph.D., 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.