7 Tech Stocks to Avoid Like the Plague in April
After a wretched 2022, tech stocks are rebounding nicely this year. The tech-heavy Nasdaq composite is up nearly 14% since Jan. 1, better than the Dow Jones Industrial Average and the S&P 500.
And we’re nowhere near the top of this run higher. If you consider the Nasdaq composite a rough indicator of tech stocks, you’ll see that the index is still down 11% from a year ago. And if you scroll back to November 2021, when the Nasdaq was at its peak, you’ll see that we’re still a solid 24% off all-time highs.
You still have plenty of time to get into this tech stock rally.
But a word of caution: not all tech stocks are alike. And while some of them are doing nicely or have a great spring ahead, you need to avoid plenty of others.
For this April, I used the Portfolio Grader tool to evaluate tech stocks based on recent performance, earnings history, analyst sentiment, momentum and quantitative measures. The Portfolio Grader assigns stocks grades from “A” to “F” – and many well-known tech stocks deserve a dreaded failing grade.
These seven tech stocks could sink your portfolio and are stocks to avoid now.
Exela Technologies (XELA)
Exela Technologies (NASDAQ:XELA) is a Texas-based company specializing in business process automation, essentially using software that automates routine, repeatable multistep transactions.
The company has more than 4,000 customers in 50 countries and works with 60% of Fortune 100 companies.
The problem is Exela’s finances. Its revenue dropped to $266.9 million in the fourth quarter, a 9% reduction from a year ago. Wall Street wants to see revenue growth, not a retraction. Exela’s failure to grow the business is a huge red flag.
The company is cutting workers and selling real estate to save between $65 million and $75 million this year. It also took out another $51 million in new funding, adding to the company’s current $1.1 billion debt.
Nasdaq is also threatening to delist the company’s stock, which has been below $1 per share since August 2022. Currently, the stock is just a nickel per share.
The company’s planning a reverse share split, but that doesn’t do anything to help the company fundamentally.
XELA stock has an “F” rating in the Portfolio Grader.
Snap (NASDAQ:SNAP) is the social media company that runs the Snapchat platform. The problem is that Snapchat isn’t the popular name on social media.
That crown lies squarely with the blazing hot Chinese platform TikTok.
Remember, it wasn’t long ago that Meta Platforms (NASDAQ:META) CEO Mark Zuckerberg referred to Snapchat as “an existential threat” to Facebook. Snapchat Stories let people share photos and videos that disappeared in a day. That was seen as preferable to Facebook’s platform particularly by younger users, where the content stayed forever. Meta responded by creating Instagram Stories, essentially a carbon copy of Facebook.
Snapchat’s not the threat any longer, though. Teens and younger users, in particular, are flocking to TikTok. The Chinese platform will have nearly 89 million users by next year. That comes pretty close to Snapchat’s 107.4 million active Snapchat users.
If you’re a SNAP shareholder, you can hope the Biden administration will follow through on threats to ban Tiktok – citing privacy concerns, unless the company is sold.
Snap failed to grow its revenue on a year-over-year basis in its most recent earnings report, posting $1.31 billion in revenue. It declined to provide guidance for 2023.
But the writing’s already on the wall. SNAP stock has an “F” rating in the Portfolio Grader.
Pear Therapeutics (PEAR)
Pear Therapeutics (NASDAQ:PEAR) creates digital therapies that help patients with addiction, schizophrenia, pain, post-traumatic stress disorder, anxiety, depression and sleeping problems.
The company went public in December 2021 in a blank check merger with Thimble Point Acquisition Corp., but it’s been a rocky ride ever since. Shares that traded for $10 when the company went public were down to just over $1 by the end of 2022. Now shares are at 11 cents.
The bottom fell out in March. The company announced it was “exploring strategic alternatives” that could include acquisition, sale, merger, or a divestiture of assets. Failing that, the company acknowledged that it might have to reorganize, restructure or liquidate.
It’s not worth going into Pear’s products or its pipeline when the company doesn’t have the money to proceed with its plans. In the fourth quarter, the company brought in $2.56 million in revenue, but expenses ended up losing $26.3 million in the quarter.
This is a Pear that’s gone rotten. PEAR stock has an “F” rating in the Portfolio Grader.
From its headquarters in Camarillo, California, Semtech (NASDAQ:SMTC) is a semiconductor manufacturer that makes chips for consumer, enterprise computing, communications and industrial customers.
Some semiconductor stocks have bounced back and are leading the Nasdaq composite’s charge. But Semtech’s not one of them. SMTC stock is down 23% since the start of the year, with much of that coming after the company posted its earnings for the fourth quarter of fiscal 2023.
The earnings themselves weren’t great – Semtech beat analysts’ estimates by posting $167.5 million in revenue (the Street was expecting $151.5 million), but that was still less than a year ago. Earnings per share of 47 cents missed Wall Street’s expectations by a penny per share.
But the bigger problem came with Semtech’s fiscal 2024 guidance. Semtech projected it would lose money, with EPS coming in at a loss of 4 cents to a loss of 11 cents per share. Wall Street was expecting a profit of 43 cents per share. So obviously, there’s a problem in what Semtech officials are calling a “challenging macroeconomic environment.”
It’s a problem that Semtech can’t solve, at least in the short term. That’s why SMTC stock has an “F” rating in the Portfolio Grader.
WiSA Technologies (WISA)
WiSA Technologies (NASDAQ:WISA) is an Oregon company that makes home entertainment systems. And it’s the founding member of the Wireless Speaker and Audio Association, or WiSA, creating speakers that connect to smart devices.
The stock currently trades at about $1.30 per share, but that’s just smoke and mirrors. WiSA executed a 1-for-100 reverse stock split in January after losing 97% of its share price. The reverse split successfully propped up the stock price to keep Nasdaq from delisting the company.
But as I mentioned before, a reverse split doesn’t change the fundamental problems that the company faces.
For WiSA, a lack of revenue is driving this company to the bottom. Earnings in the fourth quarter showed revenue of only $916,000, which was a drop of 54% from a year ago. The company ended up losing $3.49 million in the quarter.
WISA stock also has an “F” rating in the Portfolio Grader.
Lyft (NASDAQ:LYFT) isn’t the only publicly traded company in the ridesharing business. It competes head-to-head with Uber Technologies (NYSE:UBER).
But after the last year, one may wonder if it’s time to throw in the towel with LYFT stock. Because Uber is beating Lyft left and right.
Uber has a 71% market share in ridesharing, while Lyft has only 29%. That’s a rout. Uber is also doing a much better job monetizing the business by getting into the delivery business through its Uber Eats program. Lyft doesn’t offer a dedicated food delivery service. The only sideline that Lyft drivers can do is sign up to make deliveries from stores, restaurants, warehouses and the like.
On stock performance, Lyft comes out on the losing end again. LYFT stock is down 11.2% in 2023, while Uber is up by nearly 24%.
Fortunately for investors, Lyft is getting a new CEO soon – David Risher is taking over on April 17 as CEO Logan Green becomes board chairman.
Lyft brought in $1.17 billion in revenue in the fourth quarter but still lost $588 million, or $1.61 per share. Bloomberg analyst Mandeep Singh suggests that based on Lyft’s losses, the company may need to explore some strategic options, including a potential sale.
Maybe that’s an extreme option, but investors have no reason to hold on to find out. LYFT stock has an “F” rating in the Portfolio Grader.
You have to have serious trouble to have an “F” rating in the Portfolio Grader. For WaveDancer (NASDAQ:WAVD), the threat of failure is casting a dark cloud over the stock.
Until 2021, WaveDancer was known as Information Analysis and traded on the Nasdaq index with the ticker IAIC. The rebranding included a shift in strategy to focus on blockchain-enabled mission-critical Software as a Service (SaaS) projects.
But WaveDancer had some huge problems. The stock price fell 93% over the last 13 months. It was forced to sell 80% of its Gray Matters subsidiary to StealthPoint LLC in exchange for $4 million cash paid over the next seven years.
WaveDancer also retained an advisor to explore strategic alternatives for the company, which it acknowledged could be a merger or sale.
WaveDancer may have bought some time with the Gray Matters transaction, but the company’s problems are too severe to repair soon. Like other names on this list, WAVD has an “F” grade.
On the date of publication, neither Louis Navellier nor the InvestorPlace Research Staff member primarily responsible for this article held (either directly or indirectly) any positions in the securities mentioned in this article.