2022 was a terrible year for the stock market. Fortunately for 2023, news of lower interest rate hikes hints at a new bull market. However, with this renewed vigor, investors should look at which companies they should offload before they crash further, especially penny stocks. So I took a quick look at which penny stocks to sell heading into next year.
As we inch closer to a recession, small and micro-cap stocks have it particularly hard at the stock market. With more downside than upside in some of the more volatile investment options, such as penny stocks, investors should be looking to cash out of their positions or stay away entirely. Let’s take a closer look at the penny stocks to sell before they lose more value.
When the pandemic shook the world, investors had high hopes for iBio’s (NYSEMKT:IBIO) potential role in the vaccine race. It was among a select few firms that had announced the development of a vaccine and were able to make waves. Unfortunately for shareholders, it hasn’t released a single vaccine while the pandemic is firmly in the rearview mirror.
Consequently, its stock has fallen steeply this year, losing more than 80% of its value. It had announced its exit from the Covid 19 vaccine market, which seems logical for the company. However, its lead drug won’t be generating any revenue anytime soon. Unfortunately, these issues have left investors with little faith in this company and more than enough reason to pull out before things get worse.
Cenntro Electric (CENN)
Cenntro Electric (NASDAQ:CENN) is a budding electric vehicle maker facing a tall order to gain legitimacy in its sector. It went public last year after merging with Naked Brands, a popular lingerie retailer. However, since its listing, its stock has shed more than 70% of its value, with its cash burn accelerating at a tremendous pace.
Cenntro’s goal is to capitalize on the rapid growth in the U.S. EV market, with its manufacturing model centered in China. Its operational setup exposes the firm to multiple risks, including import tariffs, supply chain hiccups, and Covid-related disruptions. Moreover, its vehicles are unlikely eligible for tax credits from the Inflation Reduction Act. Perhaps the only positive for Cenntro is its relatively strong liquidity position. However, if its position deteriorates, it will swiftly face the same headwinds as the now-bankrupt Electric Last Mile.
Hyzon Motors (HYZN)
Fuel cell electric vehicle producer Hyzon Motors (NASDAQ:HYZN) has been a disaster for its shareholders. Its stock got pummeled at the stock market following a series of fraud allegations from Blue Orca, a leading short seller. Blue Orca has accused the EV firm of overstating its sales outlook and drawing investors with false claims for future profits. Moreover, the regulators have confirmed most of the short-sellers claims, leaving Hyzon as a major spot of bother.
These actions pose serious questions about the legitimacy of Hyzon’s business and its ability to stay solvent in the highly competitive EV marketplace. The firm has essentially withdrawn all operating guidance, and its operations in Europe will require restructuring. Therefore, HYZN is one of the top no-brainer penny stocks to sell.
Many retailers would be licking their lips over the upcoming holiday spending bonanza, but Express (NYSE:EXPR) isn’t one of them. Its retail fashion stores mainly cater to the younger demographic facing a potential recession. It’s a combination that doesn’t bode well for Express, which will likely finish the year in the red. Unlike its rivals, it doesn’t have the brand equity that would come in handy in the current economic downturn.
The firm faces extreme financial instability, with its highly leveraged business further complicating its positioning. With supply chain issues still plaguing retailers, Express has to meticulously manage its merchandise which can be incredibly difficult. Top and bottom-line growth has slowed dramatically of late, with its sales growth at just 1.6% from the prior-year period. Hence, it’s a tough road ahead for the company as it looks to mount a comeback in the sector.
Party City (PRTY)
Party City (NYSE:PRTY) is a global retailer specializing in party goods. Its stock and its operating results have been in the red for the whole of 2022. Its stock popped last year during the retail trading frenzy but finds itself in a precarious position heading into a potential recession. It’s facing remarkably weak sales and a growing loss amid a challenging economic environment. Moreover, with its massive debt load and recurring cash burn, it’s likely to buckle under the pressures exerted by the current economic climate.
It recently posted its third quarter results, where it generated non-GAAP earnings per share loss of $1.39, compared to a two-cent gain in the same period last year. Sales growth has been sluggish in recent quarters, while it suffers from any industry-wide helium shortage. Moreover, its management slashed revenue guidance for the year, pointing to a rocky road ahead for the business.
Nikola (NASDAQ:NKLA) is another speculative penny stock that has plummeted in value over the past few months. It aims to become a market leader in battery electric trucks with plans for a commercial launch next year. However, given its financial positioning and economic outlook, it’s tough to envision a scenario where it achieves its lofty goals. It reported a whopping $237 in negative free cash flows in its most recent quarter.
Despite a crippling financial situation, it recently added ailing battery supplier Romeo Power, which should continue to weigh down its bottom line for the foreseeable future. Hence, it seems it will be tough to scale production of its battery-electric trucks, especially in a recession. Therefore, it’s best to dump the stock and invest in safer EV bets. It’s another one of the top penny stocks to sell now.
Vinco Ventures (BBIG)
Vinco Ventures (NASDAQ:BBIG) was a popular meme stock that shot to new heights last year. It owns several tiny online video-sharing subsidiaries that have yet to exhibit any long-term growth potential. Moreover, with the intense competition in its sector, it’s tough to see how it can emerge as a winner over the long term.
With the meme stock frenzy wearing off this year, BBIG stock is down more than 60% year-to-date and will likely drop even further in the coming months. Even if markets rebound next year, Vinco’s volatility will be expected to continue as the pushing trends won’t fade anytime soon. The firm recently appointed a new management team to steer it in a new direction. Profitability remains a key goal for the company, but given the current economic climate, it’s tough to see how its plans will come to fruition.
On Penny Stocks and Low-Volume Stocks: With only the rarest exceptions, InvestorPlace does not publish commentary about companies that have a market cap of less than $100 million or trade less than 100,000 shares each day. That’s because these “penny stocks” are frequently the playground for scam artists and market manipulators. If we ever do publish commentary on a low-volume stock that may be affected by our commentary, we demand that InvestorPlace.com’s writers disclose this fact and warn readers of the risks.
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