November 8, 2025
Every successful investor knows a painful truth: knowing when to sell is often more critical than knowing what to buy.
While financial media overwhelmingly focuses on buying opportunities, our research consistently identifies companies facing significant headwinds that merit serious consideration for selling. These aren’t just stocks underperforming the market; they’re businesses confronting structural challenges, deteriorating fundamentals, or carrying valuations disconnected from financial reality.
What you won’t find here: reactionary calls based on short-term price movements or headline volatility. Each company on this list has been thoroughly analyzed across multiple metrics that historically precede substantial declines.
Smart investors understand that portfolio management requires both addition and subtraction. Sometimes the best investment decision is to redeploy capital away from troubling positions before problems fully materialize in the share price.
This week’s watchlist highlights stocks showing critical weaknesses that demand immediate attention:
Karman Space & Defense (KRMN)
Karman Space & Defense demonstrates how momentum stocks built on future promises rather than present profitability can collapse when quarterly results fail to justify astronomical valuations, with shares plummeting over 10% after the defense contractor missed bottom-line expectations despite beating revenue targets. The company reported third-quarter earnings of just $0.06 per share, falling dramatically short of analyst expectations for $0.11, while revenue of $121.8 million exceeded the $118.1 million consensus estimate. Management highlighted ending the quarter with a record funded backlog of $758.2 million, representing a 30.8% increase from year-end 2024, yet this pipeline of future work proved insufficient to prevent the sell-off as investors recognized the stark disconnect between the company’s current earnings capacity and the valuation multiples embedded in the stock price.
The market’s harsh reaction reflects the precarious position of high-flying stocks that have enjoyed extraordinary runs based largely on narrative rather than demonstrated profitability, with Karman having soared more than 262% from its February IPO through Wednesday before Thursday’s earnings disappointment triggered the reversal. Wall Street analysts moved swiftly to temper expectations, with Baird raising its price target to $70 from $60—still implying nearly 7% downside from the previous day’s close of $74.98—while RBC Capital reduced its target to $85 from $93, signaling that even the bulls have grown more cautious about the stock’s near-term trajectory. The 33.19% gross margin suggests reasonable underlying economics, but the chasm between revenue generation and bottom-line conversion raises fundamental questions about operational efficiency and whether the business model can scale profitably despite the expanding backlog.
Trading at around $71 per share with a market capitalization of approximately $9.4 billion, Karman carries one of the most extreme valuation multiples in public markets at 491 times trailing earnings, a level that assumes near-perfect execution and explosive profit growth over multiple years. This represents the type of valuation typically reserved for mature, consistently profitable technology companies with proven business models, not a recently public defense contractor still demonstrating its ability to convert backlog into sustainable earnings. The combination of persistent earnings misses despite revenue beats, massive valuation multiples that provide no margin for error, and analyst downgrades suggesting professional investors are reassessing the risk-reward profile creates a situation where even modestly disappointing results in upcoming quarters could trigger additional substantial declines. For investors who captured gains from the post-IPO surge, the current moment presents an opportune exit point before the valuation compression that inevitably accompanies companies failing to grow into their premium multiples.
EverCommerce (EVCM)
EverCommerce confronts the devastating combination of revenue deterioration and guidance reductions that exposes how cost-cutting can temporarily mask but never solve fundamental top-line weakness in software-as-a-service businesses where growth represents the primary valuation driver. The company plummeted nearly 20% following third-quarter results that met earnings expectations at $0.03 per share but missed revenue targets, with sales of $147.5 million falling approximately $450,000 short of analyst estimates while declining roughly 16% year-over-year. This revenue miss carries particular significance given that Wall Street had already lowered expectations following previous disappointing quarters, suggesting the company cannot even clear reduced bars as its sales engine continues sputtering despite the theoretically recurring revenue model that SaaS businesses are supposed to provide.
Management’s updated full-year guidance crystallizes the deteriorating trajectory, with the company now projecting sales between $584 million and $592 million compared to previous forecasts calling for revenue between $581 million and $601 million, representing a meaningful reduction at the midpoint that signals accelerating headwinds rather than stabilization. While EverCommerce simultaneously raised its adjusted EBITDA guidance to $174.5-$179 million from the prior $171-$177 million range, this improvement reflects cost reductions and margin expansion rather than operating leverage from revenue growth, creating the illusion of financial health while the underlying business contracts. The 60.70% gross margin demonstrates strong unit economics when the company can acquire and retain customers, but the persistent sales declines indicate fundamental problems with product-market fit, competitive positioning, or go-to-market execution that margin improvements cannot resolve.
Trading at $9.35 per share at the time of writing with a market capitalization of approximately $1.7 billion, EverCommerce illustrates the valuation destruction that inevitably befalls SaaS companies when revenue growth stalls or reverses, as investors who pay premium multiples for recurring revenue models demand growth rates that justify those valuations. The stock’s decline of roughly 16% year-to-date even before this week’s collapse suggests this represents continuation of an established downtrend rather than an isolated setback, with shares now trading near the 52-week low of $7.66 and threatening to break to new lows if the fourth quarter fails to show revenue stabilization. For SaaS investors, EverCommerce serves as a cautionary tale about the dangers of assuming recurring revenue automatically translates to durable business models, as the company’s persistent inability to halt sales declines despite margin expansion efforts indicates structural challenges that better cost management alone cannot overcome. The combination of accelerating revenue declines, lowered guidance for the third consecutive quarter, and a business model that requires growth to justify valuations creates a situation where investors should recognize this as a deteriorating asset unsuitable for growth-oriented portfolios.
BigBear.ai Holdings (BBAI)
BigBear.ai Holdings exemplifies how speculative artificial intelligence stocks trading at extreme valuations become particularly vulnerable when broader market conditions deteriorate and investors reassess whether premium multiples can be justified by companies posting massive losses while revenues actually decline. The stock collapsed over 21% during the week as troubling economic data including record October job cuts of 153,074—the highest for that month since 2003 according to Challenger, Gray & Christmas—and the University of Michigan Index of Consumer Sentiment hitting a three-year low triggered a flight to quality away from speculative growth names. With negative earnings and a price-to-sales ratio exceeding 13 times despite a market capitalization approaching $2.5 billion, BigBear.ai represents precisely the type of richly valued, unprofitable company that investors abandon first when economic clouds gather.
The company’s fundamental deterioration extends well beyond macro concerns, with sales declining 18.4% year-over-year in the most recent quarter while cumulative losses over the trailing twelve months approached $450 million, demonstrating that BigBear.ai is burning cash at an unsustainable rate while simultaneously losing market share or failing to capitalize on the AI boom that has enriched competitors. This inverse relationship between the AI industry’s explosive growth and BigBear.ai’s contracting revenue base suggests the company faces company-specific execution problems that prevent it from participating in the sector’s expansion, making the elevated valuation particularly indefensible. While other AI-focused companies like Palantir Technologies have justified premium valuations through consistent revenue growth and improving profitability metrics, BigBear.ai offers investors only losses, declining sales, and promises about future potential.
Trading at $5.68 per share at the time of writing with a market capitalization of approximately $2.5 billion, BigBear.ai carries a valuation that assumes the company will somehow reverse both its profitability trajectory and revenue decline to capture meaningful share of the AI market despite showing no evidence of competitive advantages or execution capabilities. The ongoing government shutdown adds additional uncertainty for a company that likely derives meaningful revenue from government contracts, potentially exacerbating the revenue declines that have already pressured the stock. For investors seeking AI exposure, BigBear.ai represents the worst possible positioning: a company trading at speculative multiples while demonstrating neither the growth nor profitability that could eventually justify current valuations, with $450 million in recent losses suggesting the path to breakeven remains distant even as the company’s sales base erodes. The combination of deteriorating fundamentals, extreme valuation multiples, negative earnings, declining revenue, and exposure to macro headwinds creates a perfect storm where continued holding represents hope rather than investment thesis, making immediate exit prudent before additional quarters reveal the full extent of the company’s competitive disadvantages in a booming industry where execution matters more than AI buzzword association.
