With the global economy recovering from a post-pandemic world, investors are on the lookout for lucrative stock market opportunities. However, amidst the most promising prospects, there exists a cohort of underperforming stocks. In order to be strategic, take these underperforming stocks to drop and bid them adieu.
Several factors can contribute to underperforming stocks ranging from industry-specific challenges or company missteps. Macroeconomic uncertainties, technological shifts or management issues can also hinder a stock’s growth potential. Therefore, investors must consider the risks and opportunities in order to move forward. As 2023 comes to a close, now is an optimal time for investors to position their stock portfolios for future success.
Below are my top three underperforming stocks to sell before 2024!
Nio (NYSE:NIO) is a prominent stock market name when it comes to electric vehicles. During the pandemic the company saw massive interest on the back of fiscal stimulus and strong EV sales volume in China. However, in 2023 the company is struggling and its path forward remains uncertain. Investors are questioning Nio’s long term growth strategy, industry competition and track towards profitability.
In its last Q2 2023 results, Nio’s vehicle sales fell 25% YOY. Additionally, Nio’s vehicle gross margins decline by 1,050 bps. Looking out to 2024, EV sales in China might be softer than what the market is expecting. There is not much to look forward to going into the new year, as the company battles with steep competition from EV rivals BYD (OTCMRKTS: BYDDY). Nio’s profitability plans are nowhere in sight, and its competition is beginning to reach economies of scale. This will make it incredibly difficult for them to compete and expand globally over the next few years. Although Nio’s might show signs of a promising future, investors should steer away for now.
Fisker (NYSE:FSR) is an electric vehicle company headquartered in Manhattan Beach, California. The company had an impressive run in 2020, only to fall more than 80% from its all time high. Fisker has failed to meet investor expectations, and its only path forward to stay afloat is dilution.
The electric vehicle company recently cut its production outlook, as they are in the midst of a liquidity crunch. Fisker is doing everything it can to create excess cash for working capital. So much so, that they are holding talks to sell emission credits to automakers. However, this won’t matter because the company’s excessive cash burn gives them very little runway. Growth over the next year will be abysmal, as a result of weaker revenue, gross margins, and EV sales volume. As the company scales back production, Fisker is among the top underperforming stocks to drop going into 2024.
Peloton Interactive (PTON)
Peloton Interactive (NASDAQ:PTON) was once one of the hottest companies on the stock market during the pandemic. When the global economy came to a screeching halt and stay at home orders persisted, Peloton’s bike came to save the day. However, the problem is that the company didn’t anticipate the outcome of the global economy reopening.
Over the last through years Peloton has seen limited growth opportunities coupled with significant quarterly losses. In their latest Q1 FY24 financial results, Peloton’s revenue fell 3% YOY to $595.5 million. While they did see a net loss improvement on a YOY basis, adjusted EBITDA was still negative. The company has also seen its brand tarnished earlier this year after recalling 2 million Peloton bikes in the United States for faulty seats. Looking out to next year, CEO Barry McCarthy expects adjusted EBITDA and FCF to swing to positive. However, that might now be enough for the stock to recover to all time highs. With this novelty product seeing the end of its days, investors should drop this underperforming stocks before the new year.
On the date of publication, Terel Miles 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.