Investors will always continue to chase weak stocks that are poorly rated for the chance at contrarian success. Yet, most times it is best to follow the herd when Wall Street repeatedly raises the warning flag on a given stock. That’s as true for Nasdaq stocks to avoid as it is for NYSE shares and shares that trade over-the-counter.
Remember, Wall Street employs hundreds and hundreds of analysts whose sole job is to analyze companies and sectors. Those analysts have access to the most up-to-date information and reply time tested models in making their assessments. In short, when Wall Street is negative on a stock it is usually for good reason. Lets take a look at three Nasdaq stocks to avoid.
Canopy Growth (CGC)
Canopy Growth (NASDAQ:CGC) is one of the best known stock names in the cannabis sector. The sector continues to disappoint overall, investors have waited and waited for profits which rarely materialize. After it became evident that profits were a rarity in the sector, investors then looked to positive regulatory judgments as catalysts. That too has proven both disappointing and slow moving. The result is that there hasn’t been much good from the cannabis sector overall and Canopy Growth is one of the names most highly associated with that disappointment.
My advice would be for anyone considering cannabis investments to simply follow the fundamentals for stocks in this sector. Disregard the potential for a federal level legalization and simply look at each company based on simple metrics like sales and earnings.
Let’s apply that logic to canopy growth to see why it is one to avoid. Sales continue to decline and the company continues to produce net losses in the hundreds of millions of dollars.
Lucid (LCID)
Lucid (NASDAQ:LCID) continues to deal with a lot of problems that make its stock simply too risky at the moment.
There is actually a very simple reason why investors should avoid Lucid. The company is going to be the same in 2024 as it was in 2023. That’s not a good thing considering that that Lucid lost nearly $3 billion in 2023.
Why should investors then believe that Lucid will be the same in 2024 as it was in 2023?The answer lies in production guidance for this year. Lucid is expected to produce 9,000 vehicles in 2024. In 2023 the company produced 8,428 vehicles. So, it’s logical to assume that the company and its stock won’t be getting appreciably better this year. In fact, there’s a better chance that LCID shares continue to head downward.
Peloton (PTON)
Peloton (NASDAQ:PTON) is exactly the kind of stock that poses a real danger to investors despite overall bearishness on Wall Street.
I mentioned that Peloton poses a real danger to investors because of the company’s recent earnings beat. Peloton managed to record $743.6 million in revenues which was higher than Wall Street had expected. That’s exactly the type of situation that could galvanize a contrarian investor into action.
It shouldn’t though because Peloton is in the midst of a slow death in which it will continue to burn through mountains of cash. That will leave it with two options. One will be to issue shares and dilute those of current shareholders. The other will be to raise debt in order to chase growth. That too will likely prove dilutive to shares.
Neither is going to work because Peloton’s business model only worked during the pandemic. The world is open again and very few people are demanding what it offers, expensive bikes and unnecessary online fitness classes.
On the date of publication, Alex Sirois 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.