It has been a rough year for investors, with the S&P 500 index posting incredible losses not seen in some time. As stocks continue to hover in this fragile market, investors must consider which assets are most valuable in their portfolios. Penny stocks are likely to get the axe, given the massive volatility in the stock market at this time. Most investors are still reticent to invest in penny stocks. Therefore, it’s probably the right time to look at some penny stocks to sell right now.
Conversely, the current market situation could present an excellent opportunity to load up on high-quality penny stocks. Doing so has provided growth investors with some impressive returns over time. That said, it’s also possible to get a little too greedy, and invest in stocks one might otherwise avoid. Hence, it’s a double-edged sword for investors looking to profit from the current market downturn.
Nevertheless, there are some penny stocks that you should probably avoid, in any case. These seven speculative penny stocks did well during the pandemic, but have fallen dramatically out of favor with investors at this time.
| EXPR | Express | $1.28 |
| SOLO | ElectraMeccanica | $1.12 |
| IBIO | iBio | $2.03 |
| BBIG | Vinco Ventures | $0.91 |
| VRM | Vroom | $1.04 |
| CENN | Cenntro Electric Group | $0.97 |
| RIDE | Lordstown Motors | $1.70 |
Express (EXPR)
Express (NYSE:EXPR) has become a meme stock over the past several months, but it is also likely to become a casualty of the upcoming recession. The high-end apparel retailer targets a younger demographic with significant disposable incomes. With inflation rates soaring to new heights this year, Express’ clientele is likely to be more practicable in its purchases.
Another major problem that the company faces is the management of its massive debt load. The business is highly-leveraged, which means it doesn’t have much wiggle room in terms of how it manages its merchandise. Moreover, with vendors becoming more restrictive in their financing terms, Express could run into serious financial trouble in the upcoming quarters. Therefore, EXPR stock is a penny stock that you should avoid now.
ElectraMeccanica (SOLO)
ElectraMeccanica (NASDAQ:SOLO) is probably one of the most unpopular EV stocks that has attracted significant criticism from experts, including myself. The Canadian EV producer aims to commercialize its three-wheeled EV model, which is unheard of in the automotive sector. It is going against precedent, and its chances of gaining widespread appeal are slim.
Thus, it’s a double whammy for ElectraMeccanica, as this company has to convince customers to purchase an EV, and buy it in a completely novel form. While the company has plans to scale its production up to 20,000 of its cars annually, investors aren’t convinced. The decline of more than 50% on a year-to-date basis in SOLO stock speaks volumes about how investors view this company’s growth prospects.
iBio (IBIO)
iBio (NYSEMKT:IBIO) is one of many biotechs that caught fire in the stock market as part of the Covid-19 vaccine race. It was among the first companies to announce a coronavirus vaccine with its two candidates, IBIO-200 and IBIO-201. Subsequently, IBIO stock shot to the moon.
Fast forward to the post-pandemic world, and iBio’s vaccine candidates have yet to hit the markets. The Texas-based biotech has had a penchant for announcing vaccines for various high-profile illnesses such as Ebola and H1N1 without following through on its promises. Covid 19 is the latest addition to that list.
The company’s recent earnings results show the company generated almost the entirety of its revenue solely from royalties. As a long-term biotech holding, I think this company is unlikely to go anywhere with its pipeline, which is still in its early development stages. Therefore, IBIO stock is likely to be worth nothing in the future.
Vinco Ventures (BBIG)
Vinco Ventures (NASDAQ:BBIG) is another meme stock that garnered much attention last year. Like other meme stocks, BBIG stock has shed a ton of value this year, with this stock now currently trading under $1 per share.
To be fair, Vinco owns multiple tiny, yet promising, subsidiaries in the online video-sharing space that boast potential for long-term growth. However, with intense competition in the niche, it’s tough to bet on Vinco as a long-term winner.
The company recently appointed a leadership team that will likely set new priorities around key areas such as profitability, growth, and returns. Profitability has eluded the business thus far, and given the current economic climate, this scenario will likely continue for the foreseeable future. With the challenging economic environment and a new management team, expect more volatility with BBIG stock.
Vroom (VRM)
Vroom (NASDAQ:VRM) operates a popular e-commerce platform for selling used vehicles. The company’s sales surged during the pandemic, benefiting from an intense shortage of used vehicles. Its business was well-suited for social distancing, which is why it caught the attention of investors during the pandemic.
Moreover, investors were also swayed by a surprising investment in the stock by the Gates Foundation. However, with the pandemic in the rear-view mirror, the stock has shed over 90% of its value from its peak as it struggles to demonstrate profitability.
Vroom’s skinny gross margins and rapidly-expanding operational expenses pose a long-term problem for the business. Moreover, it’s tough to see a scenario where the company could carve out a path to profitability in the current economic backdrop. Therefore, it’s likely more gloom and doom for VROOM stock on the horizon.
Cenntro Electric Group (CENN)
Cenntro Electric (NASDAQ:CENN) is a Chinese EV maker that went public last year by merging with defunct lingerie retailer Naked Brands. The stock has shed over 80% of its value year-to-date, with its losses accelerating at an incredible pace.
Multiple EV firms have opted for special purpose acquisition companies (SPACs) to list on various stock exchanges. Though many of these firms enjoyed stellar returns in the pandemic years, the bubble has now burst, and these businesses need robust fundamentals to survive the violent ebbs and flows in the sector.
Cenntro faces a tough challenge in gaining legitimacy in the eyes of EV investors, who have been burnt by poor-quality EV SPAC listings. Therefore, CENN stock is a pass for me.
Lordstown Motors (RIDE)
Lordstown Motors (NASDAQ:RIDE) is another early-stage EV company that is struggling to meet production targets. The EV pickup truck maker plans to produce 500 vehicles in its first batch, but needs a significant amount of cash through equity or debt to keep its plans afloat. The company received a $100 million commitment from its partners, but needs a lot more to deliver and meet its targets.
I think the company is unlikely to raise more debt, given most of the company’s assets were secured in its previous financing deal. Moreover, given the state of the stock market, an equity issuance is likely to be met unfavorably by investors. Therefore, it appears clear that Lordstown is likely to see a major liquidity crunch. On top of that, Lordstown had marketed its EV pickup truck as a one-of-a-kind vehicle, which is not the case anymore, with multiple established players in the fray.
Penny Stocks
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Read More: Penny Stocks — How to Profit Without Getting Scammed
On the date of publication, Muslim Farooque 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.