PTON - 3 Toxic Stocks to Sell Before They Plunge to New Lows

2024-07-09 06:45:00 ET

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Investing in individual stocks is not for the faint of heart, and can result in substantial losses for prospective investors. As Q3 2024 kicks off, now is a great time to consider the top toxic stocks to sell.

While some stocks promise sustainable returns, others pose significant risks that can erode your investment capital. The stocks, despite their potential for recovery, are more likely to drag your portfolio down and do more harm than good. This is due to a combination of factors, including poor financial health, unfavorable market conditions, and limited long-term growth prospects.

It can often be difficult to identify these factors, and investors often find out too late. Additionally, dead cat bounces can often trick investors into believing that the fundamentals of the company have changed. Therefore, the ability to cut your losses is extremely important to safeguard your portfolio from further implosion.

Now, let’s discover the top 3 toxic stocks to sell before they plunge even further from current levels!

Luminar Technologies (LAZR)

Luminar Technologies (NASDAQ: LAZR ) emerged as a beacon of hope in the autonomous vehicle sector. However, many high-flying, unprofitable EV startups were crushed by inflation and higher interest rates over the last 24 months. Luminar is a prime example and recent developments have painted a much grimmer picture.

Luminar is a prominent player in the lidar sensor market for autonomous vehicles. Despite initial hype and promising partnerships from companies like Tesla (NASDAQ: TSLA ), the company’s stock has been on a downward trajectory. This is no surprise with the softened demand for EVs in the last year. Moreover, the company’s financial performance is concerning, raising further questions about its liquidity. Luminar cut 20% of its workforce in May to preserve cash as the slow adoption rate hurts its ability to become profitable.

Additionally, the market it operates in is not only slowing down, but it is highly competitive. It faces steep competition from established lidar manufacturers with deep pockets like Ouster (NASDAQ: OUST ). With mounting losses and a dwindling cash reserve, LAZR is one of the top toxic stocks to sell in 2024.

Peloton Interactive (PTON)

Peloton Interactive (NASDAQ: PTON ) was a darling during the pandemic era, with its high-end exercise equipment during stay-at-home orders. However, the post-pandemic reality has been harsh for Peloton, leading to a drastic fall from grace.

Peloton skyrocketed during the pandemic-induced lockdowns and has since plummeted as gyms and the global economy re-opened. Its business model, which relies heavily on subscription-based fees, is facing significant headwinds. As more affordable alternatives emerged, Peloton’s subscriber growth has slowed down considerably. Moreover, its operating losses are growing and its path to profitability will be an uphill battle. In Q3 FY24, revenue decreased 4% year over year to $718 million. Loss from operations was $167.3 million, with paid fitness subscriptions up zero percent from the year prior.

The once optimistic projections of sustained growth have been replaced by a more sobering reality of shrinking revenue and losses. Additionally, its recent attempts to cut costs and restructure operations might not pay off. Given these challenges, PTON stock is a poster child for toxic stocks to sell before its value erodes further.

Nio (NIO)

Nio (NYSE: NIO ), often touted as the “Tesla of China”, was once a prominent player in the electric vehicle (EV) market. However, despite its early promise and initial success, the company’s limited long-term growth prospects make the stock a strong sell in 2024.

Nio faces numerous challenges, including intense competition from both domestic and international rivals. The company’s global ambitions are extremely delusional, especially considering its tiny market share of less than 2% in China. Companies like Tesla and BYD are eating its lunch, and the gap continues to grow even wider. Demand for EVs has softened tremendously in the last 12 months, and small companies like Nio are still battling with operational challenges.

Its risky business model, including battery-swapping technology, is not ideal. This technology is extremely expensive and will likely never see global adoption. Furthermore, the company’s mounting losses raise questions about its ability to become GAAP profitable. In the first quarter of 2024 , its vehicle deliveries also saw year-over-year and sequential declines. With losses set to continue, investors might have better odds at the roulette table.

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 .

On the date of publication, the responsible editor did not have (either directly or
indirectly) any positions in the securities mentioned in this article.

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