From Hype to Bust: The Downfall of Teladoc, Bark and Nike Stocks
Finding stocks to sell in 2024 is straightforward, but actually executing those trades is another matter. As always, bearish sentiment surrounds the Magnificent Seven as the S&P 500 hits all-time highs despite sweeping tech layoffs and overall economic unease. Sure, you could short a stock like Nvidia (NASDAQ:NVDA) due to massive overvaluation. But ask the thousands of traders who tried that over the past year, only to see the stock consistently climb higher, how well that worked out. It isn’t enough to be right — you must have the right timing, too. Regardless, many of these stocks to sell have lost almost all hope.
Instead, if you’re looking for stocks to sell in 2024, focus on those that are materially overvalued and facing stronger headwinds than others in their market or sector. These three stocks span sectors as diverse as consumer goods, MedTech, and apparel. What do they have in common? They’re at the top of the list of stocks to sell today.
Stocks to Sell: Teladoc Health (TDOC)
Once upon a time, I was particularly bullish on Teladoc Health (NYSE:TDOC). While the central thesis stands — like remote work, remote medicine trends will only accelerate — I’m sad to say that Teladoc may not have what it takes to keep the lights on. You’ve doubtlessly heard of last month’s events, which saw (former) CEO Jason Gorevic leave the organization suddenly and unexpectedly, leaving the firm rudderless. But the problems go far further than just executive mismanagement.
Despite telehealth trends largely accelerating, even post-pandemic, Teladoc couldn’t keep up. Though revenue ticked up a hair in the most recent earnings report, its net loss widened by nearly 20%. A fair amount of that larger net loss came from stock-based compensation, totaling $46 million or $0.42 per share. While it’s reasonable to look at this as a one-time event and an anomaly with limited impact moving forward, Teladoc has always enthusiastically offered staff stock-based compensation and I fear they won’t attract strong executive talent without a hefty options package. From an optimistic outlook, this would encourage Gorevic’s replacement to right the ship and maximize shareholder (and his) value. While that may come to pass, I wouldn’t bet on it — especially considering Teladoc is rapidly losing market share and massively edged out by major players like Zoom (NASDAQ:ZM) and Cisco (NASDAQ:CSCO).
Bark (BARK)
Subscription-based pet stock Bark (NYSE:BARK) fell victim to the SPAC-mania hype, with its value now a fraction of its pre-merger high. Before its merger, the soon-to-be-BARK SPAC traded north of $15 for months before plummeting post-merger into penny stock territory.
Today, investors recognize the grim reality of Bark’s financials and weak value proposition, leading to a loss of confidence. Some still cling to the false hope that Bark remains a viable option instead of a stock to sell, but that perspective is increasingly tenuous.
Bark’s flagship product, BarkBox, performs best when households have ample discretionary income. That, of course, isn’t the case today as US household savings rates sit at multi-decade lows. This misalignment resulted in steadily declining sales over recent quarters. Bark has never turned a profit, a major red flag for investors in today’s financial climate. The fascination with potential long-term growth without a solid fundamental foundation no longer attracts investors as it did in 2021, making Bark a prime example of a stock whose valuation escalated too quickly and then plummeted.
The company narrowly avoided forced delisting from major exchanges in March, but I don’t expect this growth stock to last much longer — best to sell while you still can.
Nike (NKE)
Nike (NYSE:NKE) stock has underperformed the broader market, losing more than 20% over the past year and 14% since January. Despite this decline, shares remain overvalued, trading at nearly 25x earnings and 10x book value. This follows a disappointing March earnings report, with expenses ballooning 7% despite December 2023 promises to cut more than $2 billion in overall costs.
Those cost-cutting initiatives don’t seem to be in play yet, which points to further trouble ahead for Nike. Many of these cuts will likely come from payroll, which brings its own set of problems. Indicators suggest Nike could pay up to $450 million in severance over the next few years as part of sweeping layoffs to save money long-term. And, of course, mass layoffs often signal deeper issues ahead.
Consumers are no longer as enamored with Nike products as they once were. Affordable alternatives abound and tightened household budgets limit overspending on luxury sports apparel, which is Nike’s core offering. A possible shift to value pricing could further erode Nike’s brand clout, potentially proving detrimental in the long run.
On the date of publication, Jeremy Flint held no positions in the securities mentioned. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
