Investor enthusiasm for risk continues to increase as the stock market notches up fresh highs. Hence, amidst the bullishness, it’s an opportune time to offload penny stocks to sell and optimize your portfolio.
The bullishness in the market reflects a major shift from the cautious stance prevalent in the past couple of years. Yet, despite this ‘risk on’ environment, not all market segments have benefitted equally. AI has been a major theme in the stock market in the past year, propelling associated penny stocks. However, penny stocks to sell in other sectors haven’t gotten the same, which signals investors to reassess their portfolios. With the broader market’s appetite for risk growing, now is an ideal time to identify penny stocks to divest, optimizing your investment strategy amidst this bullish market trend.
PetMed Express (PETS)
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Online pet pharmacy, PetMed Express (NASDAQ:PETS), faces an uphill battle, underscored by its financial missteps. The firm’s decision to suspend dividends in the second-quarter (Q2), aiming to redirect funds towards business expansion, speaks volumes about its current predicament. Moreover, Q2 represented the sixth consecutive quarter where the company missed analyst estimates across both lines. Net sales of $71 million failed to meet expectations by $5 million, while its adjusted EBITDA tanked 55% on a year-over-year (YOY) basis.
To be fair, PETS stock has been unattractive for a while. The stock has shed more than 64% of its value in the past decade, compared to the S&P 500’s gain of 179%. The dividend slash is essentially a double-whammy for investors as the stock continues to lose value. Moreover, its return on common equity stands at a negative 4.83%, indicative of a lack of residual value.
Fisker (FSR)
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Electric vehicle (EV) player Fisker (NYSE:FSR) is grappling with significant financial hurdles. It recently disclosed receiving a notice from the New York Stock Exchange for failing to maintain the minimum stock price of $1 per share over 30 consecutive days. Amidst this turmoil, Fisker is looking for additional financing, pinning hopes on the 2024 model of the Fisker Ocean to steer it toward stability. During Q4 it reported a staggering net loss of $463.6 million, with cash reserves dwindling by 67% since December 2020.
2024 is set to be another challenging year for the company, underscored by CEO Henrik Fisker’s ‘going concern’ warning in its most recent earnings call. In response to these challenges, Lucid is pivoting towards a dealership model, cutting staff, and slashing capital expenditure to ride out the turbulence. Moreover, according to a Wall-Street Journal report, the firm is preparing for bankruptcy, further complicating matters for its investors. This makes it one of those penny stocks to sell.
LivePerson (LPSN)
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LivePerson (NASDAQ:LPSN) faces a dire predicament, marked by its dwindling growth and underwhelming earnings, amidst growing competition in the conversational AI space. In an effort to pivot, the firm’s 2024 strategy involves honing in on high-margin ventures and divesting from ancillary operations. Nevertheless, it faces a steep battle, with its stock down more than 72% year-to-date (YTD).
The company’s latest financials exacerbate these challenges. Q4 saw GAAP EPS plummet to a negative 48 cents, missing analyst estimates by 17 cents. Likewise, YOY revenue is down 22.1% to $95.47 million, marking the fourth straight quarter of double-digit sales growth decline. As we advance, the company’s guidance is equally disappointing, if not more so, with $300 to $315 million in sales for the full year 2024, indicating a potential YOY revenue decline of 24% to 20%.
MicroVision (MVIS)
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MicroVision (NASDAQ:MVIS), is known for developing lidar technology critical for commercializing self-driving vehicles. Despite lacking any noteworthy achievements in business performance, its stock ticked in the green on the back of its meme stock status. In its latest quarterly earnings report, the company emphasized advancements in lidar technology, yet it admits that commercial viability and profitability remain a distant milestone. The broader EV sector’s slowdown exacerbates this cautionary stance, casting a shadow over investor confidence in EVs.
The tepid market sentiment towards the EV market, compounded by MicroVision’s admission of its long runway to market readiness, paints a complex picture. Investors, while momentarily buoyed by meme-driven enthusiasm, are confronted with the reality of the company’s speculative long-term position. All in all, it’s one of those penny stocks to sell.
Lucid Group (LCID)
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EV upstart Lucid Group’s (NASDAQ:LCID) journey since its public debut in July 2021 hasn’t matched investor expectations, to say the least. LCID stock plummeted 64.30% in the past year, amidst challenges in production. It delivered just 6,000 vehicles last year, a massive 32% drop in Q4 deliveries YOY. This downturn comes at a time when the EV market is under major duress, challenging Lucid’s position further.
According to Seeking Alpha analysts, Lucid is unlikely to achieve profitability until 2029. Moreover, compared to its rivals, Lucid’s pace of reaching the market with a competitive EV lineup is remarkably slow. It plans to produce just 9,000 vehicles by 2024, which seems insignificant considering the substantial loss it incurs with each vehicle sale. During Q4, the company lost $653.8 million in 2023 and $2.8 billion overall.
New York Community Bancorp (NYCB)
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New York Community Bancorp (NYSE:NYCB) is under immense scrutiny amidst internal and leadership turmoil. The bank’s unexpected hike in loan loss provisions and subsequent dividend reduction in January led to NYCB stock shedding more than 65% in the past three months. The troubles continued with the departure of CEO Thomas Cangemi and the elevation of Executive Chairman Alessandro DiNello, despite the bank’s recent adversities. The C-suite changes amid confessions of internal control deficiencies highlight its major operational vulnerabilities, mainly in loan review processes and oversight mechanisms.
Furthermore, the challenges underline a rough period for New York Community Bancorp, compounded by a Q4 loss that undercut expectations by $2.4 billion, resulting in a $2.7 billion deficit. This financial shortfall has severely undermined investor trust. Although the bank may steer clear of outright collapse, the resultant actions, including opting for brokered deposits or raising additional equity, could further dampen its future financial outcomes and stock performance. Given these unresolved issues and the bank’s murky path forward, investors should steer clear of NYCB stock.
AMC Entertainment (AMC)
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Movie theatre chain operator AMC Entertainment (NYSE:AMC) saw its stock nosedive by more than 90% last year, signaling deep-seated challenges. This dramatic downturn is mainly attributable to disappointing box office performances and the fast-evolving streaming platforms that are reshaping the entertainment landscape.
Though what appears to be a positive shift in its latest quarterly report, the reality underscores a more troubling scenario for AMC. The company witnessed an 11.5% bump in Q4 sales, reaching $1.1 billion, a figure comfortably surpassing Wall Street’s expectations. Furthermore, AMC saw an improvement in its net loss, which narrowed to $182 million from $287.7 million. However, it’s critical to note that the apparent improvement in its financial performance was almost entirely driven by two blockbuster event films: Taylor Swift: The Eras Tour and Renaissance: A Film by Beyonce. This reliance on a couple of major releases for sales and EBITDA growth highlights the fragility of AMC’s recovery path. Compounding AMC’s precarious financial position is its alarming debt-to-equity ratio, stands at negative 4.95, reflecting negative shareholder equity.
On the date of publication, Muslim Farooque 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
Muslim Farooque is a keen investor and an optimist at heart. A life-long gamer and tech enthusiast, he has a particular affinity for analyzing technology stocks. Muslim holds a bachelor’s of science degree in applied accounting from Oxford Brookes University.
