The stock market is at a crossroads. After a fantastic first half to 2023, markets have lost some steam heading into the fall. It remains to be seen whether a “soft landing” will play out, or if the economy will take a tumble going into 2024. That said, this is a time for caution. And a big part of that prudence is in avoiding stocks with massive red flags. These three stocks to sell in particular should be sold now before their situations further deteriorate.
AMC Entertainment (AMC)
This movie isn’t going to have a happy ending. AMC Entertainment’s (NYSE:AMC) situation has gone from bad to worse in recent months.
Amid persistent losses and a shaky balance sheet, AMC has turned to share dilution and a reverse stock split to keep things afloat. The recent maneuvers have bought the company some time, but have not fundamentally fixed the company’s problem – that is to say, its excessive debt and interest payments in relation to its operating business.
While the capital raise was necessary and understandable given the company’s dire financial situation, shareholders haven’t taken it well. As such, CEO Adam Aron fired off a spirited message to shareholders to defend his recent actions. All this speaks to infighting building up within the formerly united AMC shareholder base.
With the ongoing Hollywood strike, the outlook is dimming for 2024 box office results. And despite previous excitement, it appears that Dumb Money, the upcoming film about the GameStop’s (NYSE:GME) short squeeze, is unlikely to rekindle much trading interest in AMC stock.
AMC had a wonderful run as a meme stock. But it’s time for folks to move on. The film industry has simply struggled to bounce back from the pandemic and AMC’s balance sheet is an absolute mess. You’ll want to consider adding AMC to your list of stocks to sell, preferably before the lights go out for this theater chain.
JetBlue Airlines (JBLU)
JetBlue Airlines (NASDAQ:JBLU) is one of America’s smaller airline companies. It has, however, attracted huge attention among trades. On Friday Sept. 15th alone, for example, more than 78 million shares of JBLU stock changed hands. With short interest of more than 8% of the float, traders are looking for a squeeze. So why is it on the list of stocks to sell right now?
The thing is, the short sellers appear to be on to something here. JetBlue is showing several significant red flags.
The company has struggled to reach and maintain profitability. Even with the current boom in the travel sector, JBLU stock is selling for more than 50 times forward earnings. That’s a massive premium to most other competing airline groups.
JetBlue may potentially address its profitability struggles through mergers and acquisitions. The company is attempting to acquire ultra-low cost peer Spirit Airlines (NYSE:SAVE). However, antitrust regulators have threatened to block the deal. That seems especially true after a leaker revealed internal documents suggesting that JetBlue wants to jack up fares on Spirit flights as much as 40%.
Even if the merger is approved, it’s unclear that customers are willing to accept sharply higher fares in this softening economy that is already pressured by high levels of inflation. With the airline sector’s weakening outlook, the clock is ticking for JetBlue to figure something out before the next recession hits.
Ford Motor (F)
Last on the stocks to sell now list is Ford Motor (NYSE:F). It’s been in the news recently thanks to the strike concerns.
The United Auto Workers (launched a strike against the big automakers, demanding higher wages and better benefits. Reportedly, the automakers offered double-digit wage increases to the UAW members, but this was insufficient to meet the members’ demands.) recently
Traders might be tempted to think that Ford shares will recover as soon as the strike ends. But it’s important to note that F stock has slipped about 20% in recent months; it was already heading in reverse well before this UAW matter came up.
And that gets to the crux of the issue. The autoworkers see the massive profits that firms like Ford earned in 2022 and understandably want a bigger piece of the pie. However, there’s no guarantee that the huge profits achieved in 2021 and 2022 will continue. Indeed, the auto market appears to be rolling over as high interest rates have greatly reduced consumers’ ability to finance new auto purchases.
This appears to be leading to a situation where Ford will have to pay a lot more to its workers even as the car market loses steam. All this sounds like a recipe for slumping profit margins and a sinking stock price.
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.