The bear market hasn’t stopped in more than five years, since the 2019 flash crash that sparked predictions of a financial crisis comparable to 2008. The early days of the pandemic looked bleak economically, until unexpected monetary policy pushed stocks to new highs, highlighting clear opportunities for growth stocks. Subsequently, the Federal Reserve’s policy change heightened the bearish mood, raising fears of an economic recession and causing stock prices to fall in 2022. The market has since recovered, reaching new all-time highs even amid a recent resurgence of volatility.
Of course, this story of market-wide resilience doesn’t apply to all stocks. Numerous stock scams, severe overvaluations and irrational exuberance have come to light in recent years, resulting in previously high-flying stocks falling as investors increasingly focus on financial fundamentals.
Despite the dire outlook, these growth stocks continue to languish. If you own these stocks, it may be time to sell. If not, these are definitely growth stocks to avoid.
Growth Stock to Sell: Upstart Holdings (UPST)
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Easily identify the moment Upstart Holdings(NASDAQ:upst) market value has reached its peak. It wasn’t necessarily about stock prices, but during the now infamous incident in which stock trader Mark Minervini struggled to articulate what an upstart was. did, During a live interview, to be exact. Ironically, this interview from mid-October 2021 shows that UPST’s stock price peaked at $390 per share on October 15, 2021, and then plummeted to around $20-25 per share today. It coincided with the time when After the interview, Mr. Minervini said: I sold my shares immediately.
Like other fintech and alternative lending stocks such as Affirm, Upstart is struggling in the current high interest rate environment. The Fed’s new hawkish stance makes it unlikely that interest rate cuts will quickly resolve Upstart’s financial crisis. In the fourth quarter of 2023, Upstart’s loan originations were down 19% compared to the same period last year. In addition, sales decreased by 4%, and the net loss for the quarter amounted to $55 million, more than $10 million worse than the fourth quarter of 2022. While Upstart initially had good luck getting ahead of the artificial intelligence hype, some growth stocks don’t. Regardless of the touted “AI” capabilities, the margins are high enough for new entrants to compete effectively.
Udemy (UDMY)
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meanwhile Udemy (NASDAQ:You Dee Me) may seem like a promising concept, but the reality is that in an age of abundant free learning resources, we expect customers to pay for content they can access for free on YouTube or in books. It’s not realistic to do so. Despite having major corporate customers such as AT&T (New York Stock Exchange:T), large companies may ramp up production of in-house training and coursework, directly competing with what Udemy offers.
Additionally, there are concerns about Udemy’s ability to retain existing customers. In its latest quarterly report, the company reported a 13% increase in total business customers and a 25% increase in recurring revenue. But the good news ends here. Udemy also saw a 9% decrease in net dollar retention for large customers, defined as businesses with 1,000 or more employees, and a 10% decrease in net dollar retention. These statistics suggest that companies often don’t come back for additional services after their initial needs are met, making them a potential choice for growth stocks looking to stand out in a crowded EdTech market. This suggests an issue.
BARK
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Regular purchase pet stock bark (New York Stock Exchange:bark) fell victim to the SPAC mania hype, and its value is now a fraction of its pre-merger high. Recognizing the harsh reality of Burke’s financials and the weakness of its value proposition, investors are losing confidence, but clinging to the false hope that Burke remains a viable option rather than a stock that can be sold quickly. There are also investors.
Bark’s flagship product, BarkBox, is most successful when households have sufficient discretionary income, but this scenario is not currently reflected in the economy. This misalignment has led to a steady decline in sales in recent quarters. Burke has never made a profit, which is a red flag for investors in today’s financial climate. The allure of long-term growth potential without solid fundamentals is no longer as appealing to investors as it was in 2021, and Burke represents a group of stocks whose valuations rose rapidly and then fell precipitously. This is a typical example.
The company missed a forced delisting from major exchanges in March, but two months later, we don’t expect the growth stock to last much longer.
On the date of publication, Jeremy Flint had no positions in the securities mentioned. The opinions expressed in this article are those of the author and are subject to InvestorPlace.com Publishing Guidelines.
