Seeking out great stocks to buy is important, but many would say it’s even more essential 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 eliminate 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.
With airline stocks currently trading at extremely low multiples, long-term-minded value seekers may be eyeing the group and wondering which ticker is the better buy. But some airlines are still drowning in debt from the pandemic. While several have had to cut routes and scale back on expansion plans as supply chain and labor constraints have delayed the production of new aircraft, and airlines continue to struggle with labor shortages. The first name on our list of stocks to avoid is an air carrier that seems less equipped to handle what may be in the wings for the entire industry.
Jet Blue Airways (JBLU) has not had an easy year amid rising fuel costs, supply chain disruptions, and inflationary pressure. Recent losses have been compounded by Hurricane Nicole, a rare November storm that made landfall on the Atlantic Coast of Florida, causing closures and evacuations throughout the state and leaving a wake of destruction in its path. As a result, JetBlue was forced to cancel and suspend flights and issue travel waivers for destinations in the storm’s path. Nicole negatively affected operations for several airlines, but JetBlue seems to be struggling the most to bounce back.
With hurricane Nicole’s negative impact on operations, demand for the final month of the year has not been as strong as expected, according to the company’s management. Aside from the hurricane, this year’s holiday calendar timing has had a negative impact, with Christmas and New Year’s falling on weekends this December. As a result, the company revised its year-end and Q4 outlook. Management now anticipates revenue per available seat mile for the fourth quarter of 2022 to be at the low end of its prior guided range of a 15-19% increase from the fourth quarter of 2019. JetBlue’s disappointing comments on air-travel demand resulted in the declination of shares of most airlines. The NYSE Airline index lost 5.77% over the past week, while JBLU sank nearly 8%.
With airline stocks currently trading at extremely low multiples, value seekers may be eyeing the group, wondering which ticker is the better buy. Some airlines will be more suited to withstand a slowing economy and possible recession, while JetBlue does not seem well-equipped for further negative impact. Anyone considering JBLU at less than 8 times earnings would do better to consider a more stable name.
While the future remains bright for renewable energy, not all solar stocks are a buy. Provider of solar engineering and construction services, iSun Inc. (ISUN), has seen operating losses skyrocket alongside revenue increases in recent years.
iSun reported third-quarter 2022 revenue of $19 million, representing a 185% increase over the same period in 2021. Alongside top-line growth over the past year, the company has reported $22 million in operating losses. Operating income in the third quarter was a loss of $4.9 million compared to a loss of $1.6 million over the same period in 2021. YTD operating income was a loss of $16.2 million compared to a loss of $7 million during the same period in 2021.
Given the company’s already high debt position after a series of acquisitions in 2021, the additional losses could force it to raise equity to de-lever its balance sheet, which could mean further declines for iSun.
The small, unprofitable solar company’s stock is down 80% over the past 12 months, but it’s far from a bargain considering the risk factor.
There’s no question that electric vehicles are the future, but investors looking for bargains amid the market meltdown would be wise to steer clear of third-party companies specializing in EV charging stations like Blink Charging (BLNK). It’s much too soon to predict winners in this cutthroat niche of the EV industry primarily because it’s unclear whether third-party charging kiosks will ever be profitable.
Analysts don’t see Blink becoming profitable before 2026. By then, the company will likely be looking at a much different landscape – a lot can change in three years. From the current vantage point, the near future looks murky for the entire EV industry, considering the massive layoffs that have occurred this year amid supply chain pressure and production restrictions in China. Blink Charging shares have fallen 76% since peaking in early 2021 and are 53% lower year-to-date, but the stock is still trading at 23 times revenues. For perspective, the price-to-sales ratio for the S&P 500 index as of December 1 was roughly 3. This was also way higher than what the ratio has been historically. The current consensus is to Hold Blink stock. We’ll stick to the sidelines on third-party EV charging companies until EV industry headwinds subside.
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