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These 7 toxic stocks are recommended by analysts to sell immediately. Do you own any of them?

Jamie Cameron
9. 11. 2022
8 min read

In bear market times, the best way to mitigate losses is to identify stocks that have underperformed recently and whose future outlook is negative by simply selling. For all intents and purposes, a stressful 2022 in the stock markets is slowly coming to an end, but that doesn't mean the market will turn for the better anytime soon. Here are 7 stocks you're better off selling now to avoid deeper losses.

Roku, Inc.

The major indexes are down 21% to 31% for the year. Inflation remains at ten-year highs and it is almost certain that the Federal Reserve will raise interest rates again at its next meeting on November 2. Going forward, the yield on the 10-year Treasury note is trading at over 4%, the highest since July 2008. This is an unmistakable sign that the market - and investors - are still hedging against a possible recession.

Here are seven stocks that received the worst possible ratings from analysts and are now worth selling. Avoid these names at all costs:

$ROK+1.0%

Advertising has been around forever and has evolved quite well to find potential customers where they like to congregate. That's a big part of why advertising budgets keep shifting from old-fashioned media like print and network TV to digital ones like streaming and the Internet. Roku itself is an industry leader (streaming) that is experiencing headwinds from slowing ad spending growth by companies and high inflation that are putting pressure on margins.

ROKU shares have weakened 78.29% this year

While the stock thrived in 2020 and the first half of 2021 as people were stuck at home during the pandemic and had no entertainment other than streaming movies and TV shows, ROKU stock has plummeted significantly this year.

Second-quarter earnings of $764 million were lower than analysts who were expecting $804 million. The loss of 82 cents per share was also 11 cents higher than Wall Street expected. Roku acknowledged a slowdown in ad spending in the second quarter and said it expects that trend to continue. Its third-quarter estimate of $700 million was well below analysts' expectations of $898 million.

Carvana $CVNA-0.6%

Carvana shares fell as much as 16.9% last week, according to data from S&P Global Market Intelligence. The online used-car market received a downgrade from analysts and was negatively impacted by an earnings report from Ally Financial, which provides automotive loans.

CVNA shares are down 94.42% for the year

Carvana operates an e-commerce platform for buying and selling used cars. The company earns revenue from used vehicle sales, wholesale vehicle sales and other sales and revenues. It's a pretty cool concept. But now is not the time to own CVNA stock.

CVNA stock is down a whopping 95% this year, thanks to the stock market downturn and the sharp rise in used car prices that has made buying used cars less attractive this year.

What's more, the company is not profitable - consistently posting quarterly losses per share and even then falling short of analysts' expectations. For example, in the second quarter, analysts expected a loss per share of $1.98 - and Carvana ended up losing $2.35 per share. Analysts don't expect Carvana to start consistently turning a profit until 2025.

Caesars Entertainment $CZR+3.4%

Caesars Entertainment includes approximately 50 domestic gaming properties in the Las Vegas and regional markets. In addition, the company hosts managed properties and digital assets, which later caused significant EBITDA losses in 2021.

CZR shares have depreciated 55.69% this year

Caesars' U.S. footprint roughly doubled in size in 2020 with its acquisition of Eldorado, which built its first casino in Reno, Nevada in 1973 and expanded its presence through previous acquisitions of more than 20 properties before merging with the legacy Caesars. Caesars brands include Caesars, Harrah's, Tropicana, Bally's, Isle and Flamingo. The company also owns the US portion of William Hill (it plans to sell its international operations in 2022), a digital sports betting platform.

However, the stock is down 56% in 2022 as investors question how profitable online sportsbooks will actually be. Then when you factor in rising inflation - and a decline in discretionary spending from household budgets - CZR stock suddenly looks less attractive.

Income growth is slowing dramatically. In the second quarter, year-over-year growth was 12.75%. In the previous three quarters, however, annual growth was 27.9%, 63.5% and 86.1%. This slowdown in earnings growth is the main reason why CZR stock has such a poor rating with analysts.

UiPath $PATH-0.3%

UiPath went public on the New York Stock Exchange in April 2021 at a price of $56 per share. It wasn't that long ago, but PATH stock is currently worth less than $12 - and there doesn't seem to be a turnaround in sight.

PATH stock is down 73.35% this year

UiPath creates an end-to-end platform that provides traffic automation. Its platform is designed to be used by employees across the company and to address a wide range of use cases, from simple tasks to long-term and complex business processes. It generates revenue from the sale of licenses for its proprietary software, maintenance, support and professional services. It generates most of its revenue from the US, followed by Romania and the rest of the world.

However, in an environment of rising interest rates, growth stocks like PATH are not nearly as attractive. Sales in the second quarter of 2022 were nearly 24% better than a year ago, but the growth rate has slowed considerably from last year's growth of more than 45%, making this one of those stocks to sell and forget. UiPath is down 78% so far in 2022, and if it wants to earn a better grade from analysts, it will have to reverse its revenue growth.

JetBlue Airways $JBLU-2.7%

JetBlue Airways caused a stir among investors this summer when it announced plans to buy Spirit Airlines for $3.8 billion. The deal would create the nation's fifth-largest airline with more than 1,700 daily flights to more than 125 destinations in 30 countries.

JBLU shares have weakened 48.71% this year

The company agreed to pay $33.50 a share for Spirit, valuing the airline at $7.6 billion, including debt. The terms of the deal include a $2.50 per share payment to Spirit holders once shareholders sign the agreement, and a monthly payment per share starting in January if JetBlue is unable to obtain regulatory approval quickly. JetBlue also agreed to pay Spirit a $400 million breakup fee if the planned merger is rejected by antitrust regulators.

JBLU, meanwhile, comes on the heels of a disappointing second-quarter earnings report that saw revenue of $2.44 billion and a loss per share of 47 cents worse than estimates that called for revenue of $2.46 billion and an expected loss of 11 cents per share.

Canopy Growth Corporation $CGC+0.8%

Shares of Canopy Growth Corporation are down 70% so far this year, including 18% over the past month. Based in Smiths Falls, Canada, Canopy Growth grows and sells medical and recreational cannabis through a portfolio of brands that include Tweed, Spectrum Therapeutics and CraftGrow. Although it operates primarily in Canada, Canopy has distribution and manufacturing licenses in more than a dozen countries to support its global medical cannabis expansion, and also has the option to acquire Acreage Holdings following the federal legalization of cannabis in the US.

CGC shares are down 75.38% this year

Investors had high hopes that marijuana could very well be decriminalized "by the end of (President Biden's) current term in office. But Congress is more focused on the mid-term elections, reducing inflation and keeping a close eye on Russia's war with Ukraine than it is on legalizing marijuana.

The company's earnings for the first fiscal quarter of 2023 - released in August - show CGC stock has lost momentum. Revenue of $110.12 million was below expectations of $112.67 million. The company also posted a loss of 87 cents per share, which was more than 200% worse than expectations for a loss of 28 cents per share.

Ideanomics $IDEX-7.8%

Ideanomics is a global company that facilitates the adoption of commercial electric vehicles and supports next-generation financial services and Fintech products. You could call it a clean energy company, but it has its fingers in everything from electric vehicle design to tractor building to wireless charging. It has a financial/real estate segment called Ideanomics Capital. Overall, IDEX stock represents a company that is simply unpredictable and does business in too many segments.

IDEX stock has depreciated 79.86% this year

And for an investor, there's nothing less appealing than putting money into a company when they don't really know what to expect. In fact, the only thing you can expect from IDEX stock is that it will continue to fall - the stock is down nearly 80% this year. The company can be expected to underperform. In the second quarter, Ideanomics brought in only $34.2 million in revenue - analysts were expecting much more, about $74.5 million.

Ideanomics says it will continue to bring in new capital as it grows - but should investors really be getting a ride at this point? I don't think so.

DISCLAIMER: All information provided here is for informational purposes only and is in no way an investment recommendation. Always do your own analysis

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