Wednesday, May 29, 2024
Stocks To Sell

7 Stocks That Are Heading for a Train Wreck

One of the big slogans favored by CNBC pundit Jim Cramer is, “There’s always a bull market somewhere.” I believe that’s true. But I think there’s also always a bear market somewhere. That’s because, even during good times, companies are always being hurt by new technologies, tough competition, and/or weak products. Additionally, there are always stocks whose valuations are excessive. Among the stocks currently in a bear market, likely to last for a long time, if not forever, are the major COVID-19 vaccine makers, cable TV providers, and movie theater owners. These seven stocks to sell are all in long-term bear markets and should be unloaded by investors immediately.

Stocks to Sell: The ODP Corporation (ODP)

The ODP Corporation (NASDAQ:ODP) provides office products, including “office furniture..” and “breakroom supplies”   to businesses. It also sells cleaning and janitorial services to companies.

Although a multitude of companies are looking to limit or end the work-from-home trend, many employees are still spending considerable amounts of time working from home at this point and will likely continue to do so for many years.

As a result, “around 50% of major global companies will need less real estate in the next three years, with American cities — led by San Francisco — most exposed to empty offices,” CNN reported in June.

For obvious reasons, ODP is likely to be hit very hard by the trend. The company’s forward price-earnings ratio of 8.3 is very low, but it’s probably not low enough to account for the huge blow that the company’s business is likely to take. Thus, this is one of the top stocks to sell, at least in my book.

Coinbase (COIN)

Boding badly for Coinbase’s (NASDAQ:COIN) chances in the pivotal lawsuit filed against it by the SEC, a huge, powerful organization and multiple legal experts” took the SEC’s side in the litigation earlier this month, CoinDesk reported.

Specifically, the North American Securities Administrators Association (NASAA), to which “securities regulators from all 50 U.S. states” belong, stated that “The SEC’s theory, in this case, is consistent with the agency’s longstanding public position” and “well within the bounds of established law.”

Additionally, “two academic administrative lawyers” argued in their own filing that a key part of Coinbase’s defense –its contention that only Congress can decide whether all cryptos on Coinbase except Bitcoin are securities — is completely inaccurate. One of the lawyers works for Yale Law School.

I find it hard to believe that the judge hearing the case would issue a ruling that goes against the position of the SEC, all 50 state securities regulators, and an academic administrative lawyer who works for Yale Law School.

After all, the combined experience and expertise of the regulators and the lawyers are tremendous.

It’s widely believed that the consequences of losing the case will be catastrophic for Coinbase. Thus, I believe it should be one of the top stocks to sell in your list.

AMC (AMC)

In multiple past columns, I’ve contended that AMC  (NYSE:AMC) looks headed for disaster because it has a huge debt load, while movie theaters’ revenue is still well below their pre-pandemic levels. Moreover, due to the widespread popularity of streaming, I don’t expect the latter dynamic to change anytime soon.

But now the company has a new, potentially huge problem. Specifically, its CEO, Adam Aron, has managed to keep the company afloat and well-respected by many retail investors during the pandemic and, after that, may be forced to resign. That’s because Aron reportedly sent sexual pictures to a woman claiming to be a 17-year-old girl.

If Aron steps down, AMC may no longer be as well-loved by many retail investors. Additionally, the CEO showed great management acumen by keeping the company afloat during the pandemic and developing the idea of distributing Taylor Swift’s concert film, so losing him would be a big blow to the firm.

Moreover, his departure would distract the entire company during a critical time.

Cassava Biosciences (SAVA)

I’ve long been highly skeptical of Cassava Biosciences (NASDAQ:SAVA), citing the harsh, negative statements that many experts leveled against the company and huge issues with its “data integrity.” Given these points, I was highly skeptical about the future of the company’s Alzheimer’s drug candidate, simufilam, and I was very bearish on SAVA stock. Since the last time I wrote about SAVA, the company has become “the subject of ongoing federal probes.”

More evidence of highly problematic issues involving SAVA’s conduct has surfaced, as the City University of New York found that a scientist who worked closely with the company, Hoau-Yan Wang, had committed “scientific misconduct.”

Specifically, the school discovered evidence that Wang had “improperly manipulated…images” in 20 papers that were key to establishing the notion that simufilam could be an effective treatment for Alzheimer’s, Science reported.

The committee added that Wang had engaged in “long-standing and egregious misconduct in data management and record keeping.” Consider it as among the stocks to sell before they tumble.

Warner Bros Discovery (WBD)

Warner Bros Discovery (NASDAQ:WBD) is one of the lesser players in the streaming wars, trailing Netflix (NASDAQ:NFLX) and Disney (NYSE:DIS). And like Disney, as an owner of cable stations and a movie-production unit, WBD is being hurt by the ongoing, widespread cord-cutting phenomenon.

But unlike Disney, WBD does not have a huge parks unit to cushion its financial results from the combined impact of cord-cutting and the decline of movie theaters.

Moreover, Warner Bros Discovery is likely to be significantly hurt by the ongoing actors’ strike, which will probably cause the cord-cutting trend to accelerate and could increase the churn of its streaming business.

Despite all of these issues, WBD stock has an elevated forward price-earnings ratio of 49.5 times.

Charter Communications (CHTR)

Charter Communications (NASDAQ:CHTR) is another company that is hurt by the cord-cutting trend because it provides cable TV services. For example, Charter’s cable TV customer base fell by a net total of about 200,000 in the second quarter alone.

Charter’s efforts to offer less expensive cable packages may enable it to prevent more of its TV customers from leaving but are also likely to meaningfully reduce its profit margins going forward.

While Charter did manage to add a net total of 77,000 internet customers in Q2, the churn of its internet business is likely to be high as it faces new, low-cost competition from Verizon (NYSE:VZ) and other companies with 5G capabilities.

In Q2, the company’s overall top line rose just 0.5% versus the same period a year earlier, but I would not be surprised to see its top line start to meaningfully decline going forward.

BioNTech (BNTX)

BioNTech’s (NASDAQ:BNTX) revenue and gross profits from the coronavirus vaccine on which it partners with Pfizer (NYSE:PFE) is plunging. In August, BNTX predicted that its revenue from the shot would be roughly 5 billion euros, way below the 17.2 billion euros it received in 2022.

Additionally, the company noted that its gross profits had sunk due to write-offs on the shot taken by Pfizer. And in Q2, BioNTech’s overall revenue plunged 95% to 167.7 million euros.

Pfizer recently took $4.6 billion of write-offs on the vaccine, indicating that BioNTech’s gross profit will plunge much further in Q3 and Q4.

Moreover, Pfizer’s write-offs indicate that the overall demand for the shot is dropping tremendously, boding very badly for BioNTech and BNTX stock.

On the date of publication, Larry Ramer held a short position in COIN. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Larry Ramer has conducted research and written articles on U.S. stocks for 15 years. He has been employed by The Fly and Israel’s largest business newspaper, Globes. Larry began writing columns for InvestorPlace in 2015. Among his highly successful, contrarian picks have been PLUG, XOM and solar stocks. You can reach him on Stocktwits at @larryramer.

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