What goes up must come down, and there are a lot of stocks that look vulnerable to a plunge right now. With the market at an all-time high, many stocks have seen their share price double or even triple in the last 12 months. Yet more than a few of these high-fliers look as if they’re teetering on the precipice and could topple over on the slightest bad news.
Investors need to be careful as we enter the year’s second half. Many analysts are warning of choppy waters ahead for the market. Investment bank Morgan Stanley (NYSE:MS) just warned of a stock market correction, forecasting a decline of 10% or more in the current third quarter. Should the predictions prove true with a market pullback, certain stocks look more vulnerable than others to a fall.
So, let’s examine three such stocks poised for a dramatic plunge.
Coinbase Global (COIN)
As Bitcoin (BTC-USD) goes, so too goes cryptocurrency exchange Coinbase Global (NASDAQ:COIN). Its earnings and stock rose in this year’s Q1 as the price of Bitcoin hit an all-time high in March. But, it’s likely to be a different story when Coinbase Global reports its Q2 results on August 1. While COIN stock is up 39% on the year, cracks are starting to emerge.
In the last month, COIN stock has declined 13%. The drop in the company’s share price has come as the entire cryptocurrency sector has sunk. Ever since the Bitcoin halving event occurred in April, it reduced the available supply of the largest digital token by 50%. In one recent day of trading, the entire cryptocurrency market plunged in a 24-hour period, erasing $170 billion in market value.
Therefore, the current environment does not bode well for Coinbase Global, which relies on cryptocurrency trading and deposits. The upcoming Q2 print could be an ugly one.
Tesla (TSLA)
The current rally that has sent Tesla (NASDAQ:TSLA) stock up 45% since the end of June has been impressive. But it’s not likely to last.
The electric vehicle (EV) maker is due to issue its Q2 print on July 23. And, it is likely to disappoint. Recent data concerning the company shows some worrisome trends. First, Tesla’s Q2 deliveries were 5% lower than a year earlier. The stock has largely rallied because the latest delivery figures weren’t worse than expected.
Second, it has just been reported that, for the first time, Tesla’s share of the U.S. EV market has fallen below 50%. Data from Cox Automotive, a leading auto industry researcher, shows that Tesla now accounts for 49.7% of EV sales in the U.S., down from 59.3% a year ago. While Tesla is still the largest EV seller in the U.S., the company is losing ground to competitors such as Ford Motor Co. (NYSE:F).
If the Q2 results show a continued erosion of Tesla’s finances and market position, then the stock is likely to fall back into the red.
Carvana (CVNA)
Shares of Carvana (NYSE:CVNA) have enjoyed a blistering run over the last year. But that run might be coming to an end. CVNA stock has gained 275% in the past 12 months, including a 163% year-to-date (YTD) gain.
The stock really took off after the used car retailer reported record financial results and turned a profit during this year’s first quarter. The company announced EPS of 23 cents when Wall Street had been expecting a loss of 74 cents.
The strong print was attributed to efficiency gains in its operations and the reconditioning of second-hand vehicles. While the Q1 print and the stock’s run over the last year have been exceptional, it’s unlikely to last. This is because the shortage of new vehicles that occurred post-pandemic is now largely complete, and sales of used vehicles are declining while inventories grow on dealer lots.
Also, it’s important to remember that Carvana has been here before. Despite the huge rally over the last year, CVNA stock is currently trading 64% below its all-time high reached in 2021. The decline occurred after bankruptcy concerns emerged at the company in 2022, decimating the stock.
On the date of publication, Joel Baglole 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.
On the date of publication, the responsible editor did not have (either directly or indirectly) any positions in the securities mentioned in this article.