As market volatility appears set to continue in the near, you may wonder which stocks to sell in October.
While stocks overall could remain under pressure, as the market digests high interest rates and the looming risk of a recession, there are certain stocks that may be at risk of experiencing even choppier conditions ahead.
With some of these stocks, the reason for this is pretty obvious. There are several stocks that, while performing well despite company-related headwinds and/or rich valuations, as macro conditions worsen rather than improve, are at risk of no longer being steady performers.
However, it’s not just fundamentally weak stocks that you should be concerned about.
Some of the market’s best-loved stocks, names continuing to report solid growth and profitability, may also be vulnerable to price declines in the months ahead.
Below are seven stocks to sell this month, a mix of names fitting well in the two aforementioned categories.
With C3.ai (NYSE:AI) already coughing back many of its gains related to this year’s “AI mania,” it may seem too late to say it’s one of the top stocks to sell. After all, according to Fintel, around 37.7% of the AI software provider’s shares have been sold short.
Doesn’t that suggest a high chance of a short squeeze down the road for AI stock? Anything’s possible, but there may be a much higher likelihood that the short side is on the money with its bearish view on C3.ai.
The company may be looking to ride the generative AI wave to re-accelerated growth and a swing to profitability.
Still, based on both C3.ai’s most recently released results and outlook, it’s tough to be confident improvements are around the corner. Instead, more signs point to continued disappointment, and in turn, a continued slide lower for shares.
After declining by more than 36% over the past month, another drop for CVNA stock could be just a few weeks away. Sure, with analysts making upward revisions to their earnings forecasts, you may question my view that Carvana is about to reveal a lemon of a quarterly earnings report.
But even if CVNA beats already rising expectations, a post-earnings spike (if any) could be short-lived.
The stock continues to trade at an inflated price relative to fundamentals, especially as high interest rates are bad news for used car demand. Considering this, another big plunge, whether next month or in the coming months, seems inevitable.
After looking at some of the riskier, more vulnerable stocks to sell in October, let’s look at DraftKings (NASDAQ:DKNG).
This is a company that even I’ll admit has been firing on all cylinders lately. Shares in the sporting gambling and online casino company have experienced a stunning rebound in price so far this year.
But while DKNG stock may appear set to keep “crushing it,” thanks to strong growth and improved margins, it’s far from a lock that further improvements lie ahead.
While three large states have yet to legalize online sports books/casinos, it’s questionable whether these markets will open up by 2024 or 2025.
In addition, even as DraftKings is the largest online gambling company in the U.S. by market share, competition could start to heat up, as Penn Entertainment (NASDAQ:PENN) rebrands its sportsbook offering as ESPN Bet. Both these factors could weigh on DKNG going forward.
Groupon (NASDAQ:GRPN) shares have been on a tear for the past year, but it’s doubtful this is due to improving prospects for the local business marketplace operator.
Although revenue (after years of declines) may be normalizing, the company has yet to return to profitability.
Instead, you can say the recent run for GRPN stock results from shares becoming a popular short-squeeze play.
This run appears to be ending. Although the stock has partially recovered since plunging on Oct. 10 because of a negative reaction to an asset sale announcement, further declines may be next.
At least, that’s the view of one Seeking Alpha commentator. On Oct. 12, the commentator laid out the bear case for GPRN, pointing out that the company has negative working capital, and likely needs to raise more money to survive, much less finance a turnaround. This points to future shareholder dilution.
Gap (NYSE:GPS) shares have held steady in 2023, and have climbed significantly since last June, but looking ahead, consider it best to include it on your stocks to sell list.
As I discussed last month, there is a lot of buzz surrounding a possible successful turnaround for this retailer.
However, while the potential is there for the company’s new CEO (Richard Dickson, with vast experience in apparel merchandising) to get this company out of a long-term slump, sending GPS stock even higher, a looming recession calls this into question.
If inflation and high interest rates weigh on consumer sentiment through the Holiday season, Gap’s subsequent fiscal results could disappoint.
In turn, resulting in GPS, which currently trades in the low-teens per share, falling back toward its lows in the mid-to-high single-digits. If you bought in earlier this year, now’s the time to book any profits and move on.
Shares in this chip maker have rallied, on the heels of increased confidence in Intel’s current turnaround efforts. As InvestorPlace’s Samuel O’Brient reported Oct. 4, investors have reacted positively to news of Intel’s plans to spin off its programmable chip business.
However, post-rally, the impact of these turnaround/divestiture plans may already be baked into the INTC stock price. Shares already trade for 20 times expected 2024 earnings, which are expected to come in considerably above ($1.74 per share) forecasts for 2023 (63 cents per share).
This valuation may be fair, given that Intel (even in a best case scenario) isn’t likely going to experience the level of growth rivals like Nvidia (NASDAQ:NVDA) are experiencing.
Possibly “priced for perfection” today, any negative news could drive an outsized move lower for INTC.
Calling Tesla (NASDAQ:TSLA) one of the stocks to sell can be a risky move for a stock market commentator.
Just as it seems like the aura of invincibility surrounding the electric vehicle company and its shares is disappearing, the stock manages to bounce back on improved sentiment.
Yet while such a scenario has played out with TSLA stock in the past, this time may be different. Investors reacted negatively to news of Tesla’s latest fiscal results.
This was exacerbated by downbeat and unconfident commentary from CEO Elon Musk on the earnings conference call. The company’s price cut gambit has put the squeeze on margins.
As interest rates stay high, growth going forward could fall short of expectations. Throw it all together, and it’s hard to see why TSLA still sports a forward earnings multiple of 66, a gigantic premium to other automakers. Ahead of a possible further de-rating, sell.
On the date of publication, Thomas Niel did not hold (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.