Identifying stocks to sell is crucial for investors who want to keep their capital. That might mean occasionally rebalancing one’s portfolio, or if the situation is grave enough, some stocks might need to be cut completely out. And, with how bullish the tech industry is right now, I bet most of you are holding a few tech stocks in your portfolio because they’re great for profits.
That being said, a sudden market downturn can also lead to massive (and disproportionate) sell-offs in the tech industry, so it might be best to prune troubled tech stocks out of your portfolio now.
Who knows? You might be holding one on the precipice of a historic drop—and nobody wants that.
So, today, I’ve identified three tech stocks that have the potential to decline further once the market flips into a bearish sentiment. To compile this list, I screened the market using the following criteria:
- Hold to strong sell rating from analysts,
- Decrease in earnings and revenue in the latest annual report,
- Trades at $10 and above.
I then arranged the top three results by highest to lowest revenue decline. Here are the results.
Upstart Holdings (UPST)
Upstart Holdings (NASDAQ:UPST) provides a platform that offers personal loans, automotive retail and refinance loans and other finance products.
The company uses AI to connect lending partners with consumers, like dealerships and lenders. Its software uses cloud-native technology, allowing further development and configurability for its multi-tenant architecture.
While that sounds great, Upstart Holdings’ financials haven’t been going well. Its FY’23 report highlighted a 39% YOY revenue drop to $514 million, with fee revenues decreasing by 38%. Transaction volumes were down 59%, while conversion on rate requests went from 14.1% in the previous year to 9.7%.
Net loss also ballooned from $109 million to $240 million. So, overall, it was not a great showing.
Even more alarmingly, the company only expects revenue of around $125 million for Q2 ’24—the same as Q1. Unless something changes over the next two quarters, Upstart might only be able to report a $500 million revenue for 2024, signifying another potential decrease year over year.
While Wall Street rates UPST stock as a hold, its losses and negative financial outlook no longer paint a bright picture of what’s coming.
iRobot (IRBT)
iRobot (NASDAQ:IRBT) specializes in building robots for the home to assist with daily tasks like cleaning and navigation. The company’s most famous product, the Roomba, is a robot vacuum designed for wet and dry cleaning.
iRobots’ product lines include the Braava, Root, Braava Jet and Roomba Combo. The company also provides ongoing support through the iRobot HOME App and sells accessories and consumables through its online store and retail channels.
As exciting as its products sound, iRobot is struggling in the market, and it’s easy to see why: competition in the space is fierce.
In its 2023 report, the company reported a 25% drop in revenue, from $1.2 billion to $890.6 million. The bottom line isn’t any better: net losses increased to $11.01 per share, compared to the previous year’s $10.52 loss.
Despite new product launches and a strategic leadership change with Gary Cohen’s appointment as CEO, revenue declines across key regions and persistent market challenges highlight the precarious state of iRobot’s operations.
Investors may need to wait for analysts to consider raising their hold rating on IRBT. Or, perhaps it’s more prudent to head off the inevitable and sell IRBT stock with the rest of the troubled tech stocks on this list.
Universal Electronics (UEIC)
Universal Electronics (NASDAQ:UEIC) specializes in IoT devices and wireless universal control solutions. Its flagship product, QuickSet, is an app that can be used in any smart home or entertainment platform. It can be accessed through the cloud and set up interoperably. Its other products also use infrared remote controls, two-way radio frequency, and voice-enabled technology.
Universal Electronics has been in a downward spiral. 2023 the company reported $420.5 million in revenue, sliding by 23% from the previous year’s $542.8 million. Gross margins continue to drop, from $28.1% to 23.2%. Meanwhile, the bottom line went from a 3-cent per-share profit to a disastrous $7.64 loss due to a non-cash charge.
Despite its secured projects and continued investments in climate control and home automation channels, these numbers are alarming.
Analysts rate URIC stock as a hold, which is understandable. However, given its weak performance and flat to negative outlook, UEIC might be one of the troubled tech stocks you should let go for now.
On the date of publication, Rick Orford 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.