2022 was a disaster. Over these last 11 months, inflation hit a 40-year high. There were fears of recession. Nearly 63% of U.S. consumers were living paycheck to paycheck. Markets were crushed. Home sales began to fall at the fastest rate in decades. Consumer spending fell. Russia invaded Ukraine. China saw rare unrest over COVID mandates. North Korea rattled the cage. The Federal Reserve got far too aggressive in fighting inflation. Congress became divided. All while investors panicked, leaving many of us worse for wear. While we can’t tell you with absolute certainty what 2023 has in store for us, we can share our top list of stocks to sell.
| BMBL | Bumble | $21.86 |
| CS | Credit Suisse | $3,42 |
| DOCU | DocuSign | $46.18 |
| LYFT | Lyft. | $10.94 |
| MTCH | Match Group | $46.94 |
| SOFI | SoFi Technologies | $4.52 |
| ZM | Zoom Video | $73.75 |
Stocks to Sell: Bumble (BMBL)
Bumble (NASDAQ:BMBL) is a boom-bust online dating app and one of the top stocks to sell. In the third quarter, the company increased its total paying users, total average revenue per user, and net income. However, it earned only 14 cents a share. Bumble is blaming larger macro uncertainties for weakness. It’s also not confident that its product roadmap will accelerate growth enough to offset higher costs ahead. Unless it has a strong marketing philosophy to grow its user base, investors are overpaying for uncertain growth.
The Bumble app owes its success to its strong messaging channel. However, customers must manage inflation, which cuts their disposable income. People will spend less on drinks and going to bars with those they meet online. This will hurt Bumble’s subscription revenue in the months ahead.
Stocks to Sell: Credit Suisse (CS)
Credit Suisse (NYSE:CS) damaged its reputation months before the 2022 bear market. In July 2021, an independent external firm investigated the Archegos scandal. Archegos accumulated huge bets in various stocks using swaps, a risky derivative. Those bets did not work, forcing Archegos to liquidate more than $20 billion.
After the investigation, the firm learned that it failed to effectively manage risks in the prime services businesses. It did not have a risk escalation process necessary to avert the huge losses. A year later, wealthy investors are withdrawing funds from Credit Suisse. This will result in a loss of around $1.6 billion in the fourth quarter. The Swiss lender has more net asset outflow compared to deposits. By Nov. 11, 2022, Credit Suisse lost around 6% of its assets under management.
CS will cut 5% of its workforce to reduce costs. It is selling 889 million shares to raise billions of dollars. This will punish shareholders. CS stock is one of the top stocks to sell.
Stocks to Sell: DocuSign (DOCU)
DocuSign (NASDAQ:DOCU) thrived when the volume of electronic signatures for contracts soared during the pandemic. These days, business costs are too high as the company rebuilds its business.
DocuSign will cut its workforce by around 9%. It will take a $30 million to $40 million charge in its Q3 and Q4 fiscal 2023 year. This will align the business with the challenging macroeconomic environment ahead. Still, the software firm has questionable leadership. In addition, DocuSign’s cost-cutting efforts will slow the company’s growth. This pressures investors to avoid the stock as the business slows down. Furthermore, customers will not buy more DocuSign CLM (contract lifecycle management) solutions when their business is getting worse.
Lyft (LYFT)
Ride-sharing firm Lyft (NASDAQ:LYFT) continues to lose money. In the third quarter, it lost $1.18 a share, or $422 million, on a GAAP basis. Although the loss included a $135.7 million impairment charge, investors should avoid this stock. The weak profit margins will get worse from here.
Drivers are offsetting higher cost pressures by issuing surcharges to customers. For example, Lyft is forecasting an $82 million increase in its cost of revenue due to insurance. Since Lyft has a shallow moat, customers will easily find a substitute. This includes walking, biking, or hailing a taxi cab instead.
Lyft is investing in a rewards program to retain its drivers and decrease customer losses. For example, it increased the cash back on gas rewards associated with its Lyft debit card. Drivers get access to cash back on gas. Furthermore, those with gold and platinum levels get higher rewards. Lyft’s rewards program adds costs. As it loses more customers, its investors will face more losses.
Match Group (MTCH)
Match Group (NASDAQ:MTCH) posted a 2% increase in payers in the third quarter, to 16.5 million. Still, it reported earnings per share of 44 cents. MTCH stock trades at a price-to-earnings of 133 times. Chances are extremely high that the owner of multiple dating apps will disappoint investors.
Match recognizes the ever-changing market conditions. It is confident that Match is nimble enough to retain its customers. CEO Bernard Kim said that Tinder may diagnose and react to such changes. However, it will need to increase its marketing spending to support the launch of new products. At the moment, investors are wary. After MTCH stock rebounded from the $40.23 low, the rally stumbled. Speculators took profits when shares peaked at $52.
SoFi Technologies (SOFI)
SoFi Technologies (NASDAQ:SOFI) is a fintech that bears are firmly betting against. The short float is 11.4% while the short ratio sits at 2.12. SOFI stock traded at a 52-week low last week. President Biden’s extension on pausing the federal student loan payment by another six months added more uncertainties.
In addition, the drop in Bitcoin (BTC-USD) prices in Nov. due to the FTX bankruptcy, hurt Sofi’s addressable market. As of Nov. 25, SoFi was still offering up to $100 in Bitcoin for applicants. Already, a group of legislators is urging financial regulators to review SoFi’s crypto trading activities. Any new regulations or restrictions against SoFi will hurt its addressable market.
Fintech firms have fewer assets and fewer regulations than traditional banks. Amid the upcoming economic slowdown, investors will bet on the latter instead of speculating on unproven, emerging fintech. Speculators will no longer rely on SoFi’s vertical integration and new product launches for unproven growth. Investors should sell the stock before it risks falling further from here.
Zoom Video (ZM)
Zoom Video (NASDAQ:ZM) is the poster child of the pandemic. With no moat and video calls losing popularity, ZM stock risks losing its value. Zoom calendar might make sense in helping its customers schedule meetings. But Office 365 is one of many cloud software services that offer email and calendar apps. Client renewal rates could weaken in the next quarter. Corporate customers might shy away from a work-from-home or hybrid work environment. That would cut the need for Zoom meetings. It would decrease demand for a Zoom subscription.
On the date of publication, Chris Lau 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.