The stock market continues to climb. But in this case, a rising tide isn’t necessarily lifting all boats.
In fact, high interest rates, geopolitics and a challenging macroeconomic environment have created several problems for many firms. Make no mistake: Many companies are facing severe problems trying to navigate the current landscape.
Traders are looking to penny stocks for big upside, particularly as the rest of the market has already rocketed higher. But there is little reason for hope for these seven penny stocks to sell. These struggling companies are in sorry condition, and investors should get their cash out of these stocks before it’s too late.
Nikola (NKLA)
Nikola (NASDAQ:NKLA) is still sputtering along. The company infamously committed fraud during the tenure of its former CEO, Trevor Milton. Milton was, in fact, sentenced to four years in prison for engaging in wire fraud and securities fraud.
Since then, Nikola pivoted the business model. It built a factory in Arizona and is attempting to create a sustainable business around hydrogen-powered EV drivetrains.
Last quarter, Nikola delivered 40 hydrogen-powered EV semi trucks, which was up from the 31 it delivered in the same quarter of 2023. Despite this, the company’s revenues actually fell year-over-year and the company reported a massive operating loss.
All this is to say that Nikola should be applauded for trying to recover from its past scandals. But its business simply isn’t picking up steam quickly enough to turn the price of NKLA stock around.
Fuelcell Energy (FCEL)
Fuelcell Energy (NASDAQ:FCEL) develops and sells fuel cell and electrolysis platforms. Its goal is to offer renewable power while helping decarbonize the energy grid. However, Fuelcell’s products struggled to find much traction with customers.
As of April 30, FuelCell Energy has amassed an accumulated deficit of almost $1.6 billion. This means that the company has spent well over a billion dollars on shareholder funding over the decades.
Yet there’s surprisingly little to show for it. FuelCell generated $123 million of revenues in 2023, down sharply from the $180 million annual revenues it generated a decade ago, back in 2014.
The company lost $107 million in 2023 on those revenues, indicating the company is nowhere near profitability. In fact, the company hasn’t generated a year of positive net income even once over the past decade.
It’s possible that FCEL stock will rally again due to a short squeeze or renewed enthusiasm in hydrogen stocks. However, given the long-term poor fundamental track record, FCEL stock will likely keep dropping toward zero over time.
Faraday Future Intelligent Electric (FFIE)
Faraday Future Intelligent Electric (NASDAQ:FFIE) is one of the oddest meme stock stories out there.
FFIE stock appeared to be kaput just a month ago, with shares trading as low as 4 cents each in May. Then, meme stock mania hit. With the return of the trader known as Roaring Kitty, certain highly-shorted penny stocks blasted off. FFIE shares, for their part, went from 4 cents to $4.
These gains would prove fleeting, however. Because, under the surface, there’s simply nothing to back up this sort of move.
The numbers are startling. Faraday generated just $800,000 in revenues in 2023, while losing $432 million. It also recently withdrew its production guidance for 2024, giving investors little reason to expect meaningful improvement. Given the company’s shaky balance sheet, it’s time to stick a fork in this failing penny stock.
Tellurian (TELL)
Tellurian (NYSE:TELL) is an energy company that has primarily been seeking to try to develop LNG export terminals, and it also operates an upstream energy business.
Tellurian has struggled to secure adequate funding for planned LNG terminals. This led to a collapse in the share price. The CEO also recently left the company.
Tellurian already appeared to be running out of time, and then political issues added to the struggles. Specifically, the Biden Administration announced that it is pausing approvals of new LNG export facilities for now, making Tellurian’s already shaky business case even more challenging.
With the stock price well under a dollar, traders might be under the assumption that shares are cheap and worth a potential lottery ticket bet at this price. However, the market capitalization is above $500 million due to unending share dilution over the years. That makes TELL stock an awfully expensive lottery ticket on a company whose business model is in grave trouble and whose CEO just left.
ChargePoint (CHPT)
ChargePoint (NYSE:CHPT) is a company seeking to power up the electric vehicle landscape.
Investors once gravitated to EV charging companies as a clear “picks and shovels” beneficiary of the broader industry trend. As EVs gain market share, chargers should become increasingly valuable infrastructure for the 21st century in the same way that gas stations were a great business in prior decades.
While the underlying thesis is logical and sound, it’s far from assured that independent players like ChargePoint will be the ultimate winners. EV manufacturers such as Tesla (NASDAQ:TSLA) have already built large charging networks and oil and gas companies are making large investments in the space as well.
EV charging will likely be a great business as the industry matures. But there’s little proof that small independent players like ChargePoint will be the ultimate winners once the industry consolidates.
Traders are likely hoping for a short squeeze after CHPT stock’s outsized losses over the past year. However, due to dilution, the company still has a chunky $700 million market capitalization despite being a penny stock. With revenue growth stalling out and the company running massive losses, ChargePoint’s story has run out of juice.
MicroVision (MVIS)
MicroVision (NASDAQ:MVIS) is a technology company that was founded in 1993 and went public in 1996. Over the years, it attempted to commercialize various products and services, but little has caught on.
MVIS stock has fallen from a (split-adjusted) peak of $500 per share in 2000 to just $1 today. Shareholders have paid a heavy price for Microvision’s string of unsuccessful business ventures. Over the past decade, Microvision’s peak revenue year was 2018, when it brought in $18 million in revenues. Since then, however, that business line has been discontinued, and revenues have plunged to well under $10 million annually.
Microvision’s current lead product is a light detection and ranging (lidar) system to help commercialize self-driving vehicles.
However, lidar remains an unproven field and even industry leaders like Luminar Technologies (NASDAQ:LAZR) have seen their share prices collapse over the past year. There’s little reason to believe that MicroVision, with its limited financial resources and poor track record, will be able to compete in this industry.
Ginkgo Bioworks (DNA)
Ginkgo Bioworks (NYSE:DNA) is a specialty chemical company that operates primarily in the healthcare and life sciences space. It has developed a synthetic biology platform to help clients with cell programming — the idea being that Ginkgo can enable the biological production of novel therapeutics, food ingredients and petroleum-derived chemicals.
The most obvious application is in biotech to aid the research and development of new drug therapies. This made for a compelling story. Ark Invest’s Cathie Wood was a prominent backer, and shares rocketed higher. However, short sellers raised a number of troubling allegations about the firm’s revenues, corporate strategy, and third-party relationships.
While short sellers often get things wrong, the accusations appear to have been on the mark in this case. Ginkgo Bioworks’ revenues reached their peak at $478 million in fiscal year 2022 but plunged nearly in half to $251 million last year.
Those concerns appear to have played out. The company’s revenues peaked at $478 million in fiscal year 2022 but fell to just $251 million last year. Analysts expect another steep decline to $186 million in revenues for the current year. The company lost a stunning $854 million over the past 12 months, and its balance sheet won’t sustain these losses for long. That makes DNA a penny stock to sell immediately.
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Read More: Penny Stocks — How to Profit Without Getting Scammed
On the date of publication, Ian Bezek 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.