Blue-chip stocks are household names that have been around for many years. While most blue-chip stocks have been around for decades, some of them have been in business for more than 100 years.
Seniority usually results in more market share and makes it more difficult for competitors to enter the industry, especially when monopolies and duopolies are involved.
While some household names offer more stability than most stocks, other blue-chip stocks are well past their primes. Furthermore, some blue-chip stocks present the serious risk of losses for long-term investors.
Buying household names can be risky since investors may opt to monitor them a bit less.
You can get impressive returns with a portfolio of blue-chip stocks. However, a few bad apples can ruin an entire portfolio.
These blue-chip stocks have had their day but face many challenges moving forward.
Investors may benefit from avoiding these stocks and trimming their positions.
Warner Bros Discovery (WBD)
Warner Bros Discovery (NASDAQ:WBD) might become a victim of its own success. It’s the merger of two movie studios that have seen better days and better movies.
Before old classics became available on demand, people had more reasons to visit the movie theater and check out new releases.
Now, with many classics available and more flicks than people have time to watch, new content faces an uphill battle. The stock has also faced an uphill battle based on its 28% year-to-date decline.
Warner Bros Discovery reported a 7% YOY decline in Q1 2024 revenue. The company also reported net losses of almost $1 million.
Declining revenue and high losses aren’t good for any stock, but it’s particularly concerning for Warner Bros Discovery. That’s because the company has $43.2 billion of gross debt compared to only $3.4 billion of cash on hand.
Issues with losing some NBA games to competitors can also create more pressure for the struggling company.
Disney (DIS)
Disney (NYSE:DIS) enjoyed a good rally at the beginning of the year as activist investors, but all of those gains are gone. Shares have basically remained constant year-to-date, but that includes about a 27% descent from the 2024 high. Disney stock is also down by 36% over the past five years. The lost decade is back in play.
The company doesn’t have many ways to ignite further growth. It’s exhausted most of its intellectual properties with nostalgia bait and bad writing. If this continues for an additional decade, Disney has a real risk of losing relevance among future generations.
Q2 FY24 results didn’t show much growth. Revenue inched by up 1.4% YOY to reach $22.1 billion. Disney will likely stay in business for the rest of the century, but investors need growth to justify buying shares.
Net losses fell to $20 million for the quarter. Disney may have great intellectual properties, but poor leadership has been squandering the company’s potential for years.
Tesla (TSLA)
Tesla (NASDAQ:TSLA) stock has been a roller coaster for much of its existence. Shares are up by more than 1,200% over the past five years and reached a $1 trillion market cap during that time.
However, the valuation has remained a question for years, including when Tesla reached the milestone. The combined market caps of multiple top automakers didn’t reach $1 trillion when Tesla reached that level.
Shares have plunged from those levels and remain down by 15% year-to-date. The stock still has a lofty 59 P/E ratio as investors mistakenly view it as a tech company instead of an automobile company.
Tesla’s Q2 2024 results indicate that almost 80% of total revenue came from automobile sales. While automobiles made up a lower percentage of revenue this quarter than in other quarters, it’s still a large amount.
Tesla’s automobile revenue dropped by 7% YOY while other business segments helped it net 2% YOY revenue growth. Meanwhile, GAAP net income dropped by 45% YOY. Lower profit margins, multiple headwinds and a lofty valuation don’t sell a good picture for Tesla stock.
On the date of publication, Marc Guberti 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.