The stock market has trended higher over the last month as this has proven to be one of the best earnings seasons in years. With over three-quarters of companies having now reported, earnings have grown around 5% in the last quarter. As one of the biggest gains since the pandemic and beats analysts’ expectations, it begs the question of which stocks to sell now. Notably, gains ensued despite concerns the Fed may not cut interest rates as soon as initially anticipated. In fact, the Fed is less inclined to cut precisely because economic activity remains strong.
While this is generally positive news, some analysts are worried the market has gotten ahead of itself. It keeps trending higher, with valuations too high. Almost half of professional traders believe the market is overvalued, making it a good time to think about which stocks to sell now. Whether an imminent reversal occurs or not, certain vulnerable companies are more vulnerable than others.
Some stocks to sell now might have seen gains, hoping to replicate competitors’ earnings. Investors are still flocking to AI-adjacent stocks, hoping for performances akin to Nvidia (NASDAQ:NVDA). This has left several stocks overdue for correction. They have exceeded fair value and would be reasonable candidates to purge from a well-rounded portfolio ASAP.
The following are three stocks to sell now:
Peloton Interactive (PTON)
Peloton Interactive (NASDAQ:PTON) is one of the stocks to sell now. It saw significant growth during the pandemic lockdowns but has struggled to perform even as life returned to normal. Even when consumers exercised at home during lockdowns, Peloton could not generate profits, and losses continued to mount.
Most recently, the company received a brief boost when reports of private equity firms expressing interest in an acquisition surfaced. It was probably hoped a buyout might offer a higher price than the current market value. However, despite rising 13% in a single day, Peloton’s share price remains in the red for the year. This indicates the latest bump may be the last opportunity for holders to exit, making this one of the stocks to sell now.
Peloton has consistently underperformed forecasts over the past several quarters. Its stock price has dropped 98% from its prior high as a ‘meme stock’ a couple of years ago.
MicroStrategy (MSTR)
MicroStrategy (NASDAQ:MSTR) was one of the worst-performing stocks in April. It naturally earned a place as the second pick in a list of stocks to sell now. Unlike other stocks, it has not seen a rebound since it slipped lower. This might be due to its CEO having closely tied the company’s fortunes to the price of Bitcoin (BTC-USD). Recently, the cryptocurrency underwent its much-anticipated halving and has seen dropped lower. MicroStrategy’s 35% decline in April mirrored the underperformance of the leading cryptocurrency.
Even as Bitcoin trends lower, MicroStrategy continues issuing convertible debt to purchase more of the cryptocurrency, potentially diluting shareholder equity. Meanwhile, the U.S. dollar strengthened amid expectations that bond yields would remain elevated for longer due to high inflation. This prevented the Fed from cutting rates.
Whilst the all-in bet on cryptocurrency may work out in the long run, it represents a high-risk strategy given the volatility of digital currencies. Additionally, with the company recently reporting a net loss last quarter, MSTR is one of the stocks to sell now.
Wingstop (WING)
This fast-casual dining chain, Wingstop (NASDAQ:WING), shows promise. It is expected to open hundreds of new locations this year as part of its long-term goal of more than tripling its footprint. Unlike other stocks to sell now in this list, the company was profitable in the last quarter. However, investors appear to have invested heavily in hopes of gains that have not yet materialized.
This has pushed its price-to-earnings (P/E) ratio up to a high 141x. As a result, it causes concerns for technology and restaurant companies that typically trade around 20 times earnings. Such a divergence makes WING yet another of the stocks to sell now.
Its stock price has increased over 50% so far this year, outpacing its same-store-sales growth of 22% in the same period. While 22% sales growth is solid for a restaurant chain, the market still seems overly enthusiastic. This allows WING to be added to this list of stocks to sell now, as its share price will likely adjust to a more realistic level soon.
On the date of publication, Stavros Tousios 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.