Thursday, February 22, 2024
Stocks To Sell

3 Stocks to Sell as Companies Prepare for Layoffs

When Apple (NADAQ:AAPL), Goldman Sachs (NYSE:GS), Meta (NADAQ:META), and Microsoft (NASDAQ:MSFT) are all among the companies preparing for layoffs, investors should gird their portfolios for a potential downturn.

Tech stocks seem to be taking the brunt of it despite being the top performing sector this year. Yet it’s beginning to spread to other areas of the economy, too. Retailers, manufacturers, and even financial stocks all getting ready to downsize. A slowing economy will impact everyone.

For that reason, investors may want to consider paring down their holdings. The following companies are three stocks to sell before layoffs are announced.

Robinhood (HOOD)

Online brokerage Robinhood (NASDAQ:HOOD) is down 82% from the all-time high it hit after going public in 2021. Shares, however, are 23% higher since the start of the year and 42% above where they stood 12 months ago. An economic downturn would further erode its customer base.

Robinhood saw monthly active users peak at over 21 million in 2021. It has witnessed a steady decline since even though they inched higher to 11.8 million last quarter. Moreover, its main revenue generator is under investigation by regulators.

Because Robinhood doesn’t charge investors to make trades, it relies upon how many trades it directs to market makers to generate revenue. Called payment for order flow, the brokerage isn’t necessarily concerned with getting the best prices for its customers’ buy and sell orders. The Securities & Exchange Commission takes a dim view of that process. While it might not ban the practice altogether, the agency may implement other controls that impact Robinhood’s bottom line.

These factors make the stock a key company that’s potentially preparing for layoffs.

Paramount Global (PARA)

Okay, Paramount Global (NASDAQ:PARA) has already announced massive layoffs. It is cutting 25% of its staff from TV networks and is shutting down MTV News. It is merging its flagship Showtime studio with MTV Entertainment Studios while also combining nine different network teams into a single entity.

Just because Warren Buffett continues to own Paramount Global stock, however, doesn’t mean you should. After all, he admits the movie studio and streaming service “isn’t fundamentally that good of a business.” Its decision to slash the dividend by 80% to $0.05 per share was also called “not good news.” It completely undid all the payment increases Paramount made over the past 12 years. It is one of the most impacted stocks by company layoffs. Shares have lost 36% of their value this year.

The business isn’t all bad. Streaming, for example, saw a 39% increase in revenue to $1.5 billion as Paramount+ hit 60 million subscribers in Q1. But the studio generates 71% of its money from broadcast TV and cable. Revenue there fell 8% to $5.2 billion. Movies lost another 6%. The good can’t begin to make up for the bad.

So, in summary, it’s potentially one of those companies that are preparing for layoffs.

Tesla (TSLA)

Unlike Paramount, there’s no question Tesla (NASDAQ:TSLA) is having an awesome year. Its stock has more than doubled in 2023. Yet there are signs of significant trouble ahead.

Demand is evaporating for electric cars and the EV maker is slashing prices. As competition increases, Tesla doubled the discount it offered on its Model 3 cars in the U.S. to $2,680. It’s also offering new discounts on its Model Y. It’s also slashing prices elsewhere around the world. This puts it in a category of companies that could be considering layoffs.

Tesla used to be the car that sold itself. It did not need to spend money on advertising as word of mouth support was enough to move vehicles. Company founder Elon Musk now says Tesla will begin advertising its EVs to sell them.

Tesla is still the leading EV maker. The Model Y is the best-selling car in the world. That’s the first time an EV has claimed that title. The problems it faces, however, could lead it to make some severe decisions.

On the date of publication, Rich Duprey 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.

Rich Duprey has written about stocks and investing for the past 20 years. His articles have appeared on Nasdaq.com, The Motley Fool, and Yahoo! Finance, and he has been referenced by U.S. and international publications, including MarketWatch, Financial Times, Forbes, Fast Company, USA Today, Milwaukee Journal Sentinel, Cheddar News, The Boston Globe, L’Express, and numerous other news outlets.

Rich Duprey has written about stocks and investing for the past 20 years. His articles have appeared on Nasdaq.com, The Motley Fool, and Yahoo! Finance, and he has been referenced by U.S. and international publications, including MarketWatch, Financial Times, Forbes, Fast Company, USA Today, Milwaukee Journal Sentinel, Cheddar News, The Boston Globe, L’Express, and numerous other news outlets.

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