Seeking out great stocks to buy is essential, but many would say it’s even more important to know which stocks to steer clear of. A losing stock can eat away at your precious long-term returns. So, figuring out which stocks to trim or get rid of is essential for proper portfolio maintenance.
Even the best gardens need pruning and our team has spotted a few stocks that seem like prime candidates for selling or avoiding. Continue reading to find out which three stocks our team is staying away from this week.
New York based LivePerson, Inc. (LPSN) is best known as the developer of the Conversational Cloud, a software platform that allows consumers to message with brands. The company tops our list this week after Q4 financial results that point to a substantial slowdown in organic revenue growth that is unlikely to meaningfully improve until fiscal 2023.
Management signaled a shift in the growth strategy ahead to focus more on generating earnings in 2022 rather than gaining enterprise customers. The slower growth profile, powered by a steady return toward more normal in-person working trends, could translate into weaker earnings than Wall Street is hoping for.
To that end, the company predicted that sales in the first quarter of about $125 million, translating into a 16% boost. Revenue for the full year will climb by less than 20% to about $560 million where most Wall Street pros were looking for that 2022 sales figure to be closer to $600 million.
LivePerson was downgraded by no less than nine firms after the disappointing call. Among the analysts to revise their ratings was Evercore ISI analyst Peter Levine who downgraded LPSN to In Line from Outperform and slashed the price target to $20, down from $75 following the company’s “sub-par results and a weak outlook.”
With Roku price nearly 80% off of its July ATH, eager investors may see a buying opportunity here. Considering the obstacles that the not-yet-profitable company is up against, we beg to differ.
The supply chain disruptions that hampered growth in the U.S. television market in 2021 will likely persist well into 2022. “Overall TV unit sales are likely to remain below pre-Covid levels, which could affect our active account growth,” Anthony Wood, Roku’s founder and CEO wrote in the company’s letter to shareholders. “On the monetization side, delayed ad spend in verticals
For the first quarter, Roku said it sees revenue of $720 million, which implies 25% growth. Analysts were projecting revenue of $748.5 million for the period. Pivotal Research was one of several firms to decrease its rating on Roku recently. Analyst Jeffrey Wlodarczak downgraded the stock from Hold to Sell and slashed its price target to $95 from $350.
“The bottom line is with increasing competition, a potential significantly weakening global economy, a market that is NOT rewarding non-profitable tech names with long pathways to profitability and our new target price we are reducing our rating on ROKU from HOLD to SELL,” the analyst wrote in a note to clients.
Healthcare facility maintenance and food service provider Healthcare Services (HCSG) made our list of stocks to avoid after reporting horrific Q4 results. The company reported Q4 earnings of $0.03 per diluted share, down from $0.37 in Q4 2020 and 57% lower than consensus expectations. What’s more, EBITDA missed the mark by 54%.
HCSG spending has been on the rise for the past few quarters and spiked more than 7% quarter over quarter in Q4. Management doesn’t expect cost of service to come back to their historical target of 86% until the end of the year, and that seems like an optimistic estimate.
“Our fourth quarter results reflect continued margin pressures resulting from workforce availability, inflation and supply chain disruption. We remain actively engaged with our customers to modify our service agreements to adjust for the extraordinary inflation experienced during the second half of 2021, as well account for future inflation on a real-time basis,” said CEO Ted Wahl.
With occupancy rates at nursing facilities across the U.S. making a much slower recovery from the pandemic than expected, the industry has shed more than 220,000 jobs in the past year. Healthcare Services struggled to find footing in 2021 and the prospects for 2022 are not looking great.
HCSG has underperformed significantly when compared to the broader market. Over the past 12 months the S&P 500 is 7% higher while HCSG is lower by 40%. The pros on Wall Street give the stock a Hold rating. We’ll stay away until headwinds subside.
