Some stocks appear doomed. That is usually because the companies behind them are failing to execute their plans, posting disappointing financial results, hemorrhaging cash, losing market share or all of the above. The result is stocks that only seem to decline in value, dragging their shareholders’ portfolios down with them. The key to successful investing is to spot the stocks of poorly run companies, or companies with long-term systemic problems and avoid them. Should a person have the misfortune of betting on a doomed stock, it is best to cut one’s losses and sell before the share price falls further and more capital is lost. As we reach the halfway point of the fourth quarter 2023, earnings season, clear winners and losers have emerged among publicly traded companies. Here are three doomed stocks to dump before they dive for February 2024.
How about Snap (NYSE:SNAP)? Shares of the social media company are down 34% following poor revenue figures and weak forward guidance. The company behind the Snapchat social media platform announced earnings per share (EPS) of 8 cents, which was better than consensus estimates of 6 cents. Unfortunately, revenue in the fourth quarter of 2023 came in at $1.36 billion versus the $1.38 billion expected on Wall Street.
Worse, Snap forecasted a loss of $55 million to $95 million in the current first quarter of 2024. That is much higher than analysts’ projections for a Q1 loss of $21.9 million. The company continues to struggle following a downturn in digital advertising coming out of the COVID-19 pandemic. This was the sixth consecutive quarter of single-digit growth or sales declines. Recently, Snap announced that it will cut 10% of its global workforce. But it remains to be seen if that move will ultimately help its finances.
SNAP stock is now down 6% over the last 12 months and looks doomed.
Another day brings another safety concern regarding Boeing’s (NYSE:BA) 737 Max jets. The latest bad news from the company is that it discovered two improperly drilled holes in some fuselages, and that discovery will further delay the delivery of about 50 of its aircraft. Also, aviation investigators found that some required bolts on 737 Max planes are missing entirely. That is just the latest in a series of safety problems at Boeing dooming the company’s stock.
Boeing and its line of 737 Max aircraft have endured two fatal crashes and repeated groundings by the Federal Aviation Administration (FAA) in the last five years. Boeing is under intense regulatory scrutiny following the mid-air blowout of a door plug on an Alaska Air (NYSE:ALK) flight that occurred on Jan. 5. Boeing also continues to have problems with sub-contractor Spirit AeroSystems (NYSE:SPR) that manages much of the construction on the 737 Max planes.
The problems have conspired to push BA stock down 17% year-to-date. Over the last five years, Boeing’s share price has declined nearly 50%, making this a doomed stock to dump before it dives further.
Peloton’s (NASDAQ:PTON) stock is down 26% less than six weeks into the year and trading near a 52-week low. This after the maker of internet-connected treadmills and stationary bikes issued woeful Q4 2023 financial results and provided a dire outlook. The company guided for a loss in the current first quarter of between $20 million and $30 million. Analysts had a loss of $2 million penciled in for Peloton. The company now says it hopes to return to revenue growth in a year’s time.
Clearly, the turnaround strategy Peloton announced coming out of the pandemic is not working. Management had developed a strategy to focus less on treadmill and bike sales and instead try to grow subscriptions to its online fitness classes. But now, Peloton says it is having trouble growing its paid app subscribers and sees an uncertain future ahead. That is not what analysts or investors wanted to hear from the company. Consequently, PTON stock has dropped 72% in the last 12 months.
On the date of publication, Joel Baglole did not hold (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.