While the topic of stocks to sell immediately generates controversy, it’s similar to the wacky off-season transactions that occur in baseball. At the end of the day, an organization must make the best decision to ramp up its chances of success. That means you can’t get too sentimental about your roster or in this case your individual holdings.
Take for instance, Mike Trout. Long the face of the Los Angeles Angels, Trout is best known for blasting home runs into the upper deck. As well, he has hours of highlights making seemingly impossible catches when he’s on the defensive side of the field. Unfortunately, age and injuries have caught up to him, putting pressure on the Angels.
Sure, the club stated emphatically that it won’t trade Trout. And there’s no indication that he wants to leave anyway. However, circumstances can change. At 32 years old, Trout surely recognizes that his opportunity to win a championship ring is fading with a grossly mismanaged team like the Angels.
And that’s what stocks to sell really comes down to. It’s not about hating any of the below enterprises. Rather, it’s just recognizing outside influencing circumstances and making the best decision for yourself.
Vertical Aerospace (EVTL)
What it is: Based in Bristol, England, Vertical Aerospace (NYSE:EVTL) is an aerospace manufacturer. Specifically, it designs and builds electric vertical takeoff and landing (eVTOL) aircraft.
Relevance: There’s zero doubt that the eVTOL market is incredibly relevant. According to a report by SNS Insider, the segment could reach a valuation of $22.71 billion by 2030. That comes out to a massive compound annual growth rate (CAGR) of 50.35% from 2023. Here’s the problem: it’s difficult to see how a financially vulnerable enterprise like Vertical Aerospace can compete with more established eVTOL specialists. Especially because many of them enjoy backing from major blue chips.
Downside Catalysts: As alluded to above, Vertical’s financials present challenges, making it one of the stocks to sell. In particular, it’s a pre-revenue company with a retained loss of $467 million. As of the third quarter, it only has cash amounting to $92 million. And analysts rate shares a moderate sell.
Upside Risks: Options sentiment appears bullish for EVTL, with the implied volatility (IV) curve rising alongside rising strike prices for out-the-money (OTM) calls.
Rackspace Technology (RXT)
What it is: Headquartered in Windcrest, Texas, Rackspace Technology (NASDAQ:RXT) is a cloud-computing firm. Per its website, Rackspace explores new frontiers with generative artificial intelligence technologies.
Relevance: As with the aforementioned eVTOL market, there’s zero question that generative AI is relevant. According to a Fortune Business Insights report, this sector could hit a valuation of $667.96 billion by 2030. That would come out to a CAGR of 47.5%. But can Rackspace deliver the goods? I don’t want to be the bearer of bad news but RXT lost almost 40% of its equity value since the January opener.
Downside Catalysts: After seeing annual revenue consistently grow from 2019, circumstances don’t seem to favor a continuation of the trend. In Q3 2023, the company suffered a 7% sales decline. Also, its trailing-12-month (TTM) revenue haul of $3.02 billion is noticeably below the $3.12 billion posted in 2022. Analysts aren’t pleased with RXT, pegging it a moderate sell with a $1.61 price target, implying 9% downside.
Upside Risks: RXT has been on the move recently, with shares gaining about 21% in the trailing month.
Zillow Group (Z, ZG)
What it is: Headquartered in Seattle, Washington, Zillow Group (NASDAQ:Z, NASDAQ:ZG) is a technology-based real-estate marketplace.
Relevance: Obviously, the residential real estate boom represented one of the hallmarks of the Covid-19 cycle. Naturally, companies like Zillow benefitted handsomely from the trend, which in large part was boosted by low interest rates. Supposedly, the Federal Reserve will consider interest rate cuts after spiking them over the past two years. However, such an action may exacerbate the inflation problem that the economy struggled with in 2022.
Downside Catalysts: On a fundamental level, a major downside catalyst is the strength of the jobs market. With the employment print for November coming in hotter than expected, it raises a quandary. If the Fed lowers rates, that will likely accelerate home prices, thus hurting affordability again. Financially, since printing revenue of $3.34 billion in 2020, top-line demand has fallen off a cliff.
Upside Risks: While analysts’ average price target of $50.17 implies that Zillow is one of the stocks to sell, it has skyrocketed in the trailing month.
On the date of publication, Josh Enomoto 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.