I don’t want you to think this was a clickbait headline. So allow me to be clear.
This article is about three not-so-well-known tech stocks that are trading for less than $10. They may not be penny stocks, but anytime a stock trades for less than $10, investors can expect higher-than-usual volatility.
In bull markets, that can work to your advantage. But with the entire market selling off sharply, these stocks will drop sharply as investors flee to the real, or perceived, safety of other equities or asset classes.
Investors frequently hear the phrase “buy the best and forget the rest” as a mantra for navigating market volatility. None of these stocks are household names. And these companies are also light on profit. It bears repeating inexpensive stocks, particularly tech stocks, can be appealing. They’re also frequently cheap for a reason.
However, the attribute that each of these stocks share to put them on this list is a sell rating from analysts. Considering that analysts rely on access to corporate insiders as part of their research, a sell rating is uncommon. So, when analysts are telling you to pass on a stock, it’s a fairly definitive statement.
Let’s examine three tech stocks that all but the most patient, risk-tolerant investors should sell and wait for better days.
At first glance, Wipro (NYSE:WIT) has two things going for it. First, it offers AI solutions as part of its services. Second, it’s domiciled in India which is one of the fastest growing economies.
The company provides IT professionals to companies to help them program AI language models. In its most recent investor presentation, Wipro reported that its IT services business has grown at a compound annual growth rate (CAGR) of more than 6% in the last 10 years.
However, AI is moving fast. And as my InvestorPlace colleague Larry Ramer pointed out to investors earlier this year, AI is making Wipro’s services redundant. The good news is that the company is showing stable revenue and earnings. That suggests the company isn’t losing business.
The bad news, from an investor’s standpoint, is that it’s not growing either of those metrics. And it doesn’t appear that there will be new growth anytime soon.
Of the three tech stocks on this list, I would be most interested in Wise (OTCMKTS:WPLCF). The fintech company went public via a direct listing in 2021. Like many stocks that went public during that time, investors have treated the stock with skepticism.
Wise facilitates cross-border money transfers for customers in the United Kingdom (where the company is headquartered) and all of Europe. Other international locations include North America and the Asia-Pacific region. If you’ve ever needed to send money internationally, the benefits are obvious.
The company has been steadily growing its revenue. And that growth is relatively balanced between business and personal use as well as by region.
However, in its most recent quarter, the company missed estimates on both the top and bottom lines. That’s not good news for a stock that’s up 22% in 2023. WPLCF stock is covered by sixteen analysts. Of those four give it a sell or strong sell rating. That’s enough to hold the stock’s momentum back for now.
SecureWorks (NASDAQ:SCWX) is a cybersecurity company that provides managed threat prevention, detection, and response (MDR).
The company is successfully pivoting from on-premise to cloud-based cybersecurity with its Taegis system, which is helping it generate sizable recurring revenue.
That’s generally a highlight that investors like to hear. The issue is that revenue is dropping year over year (YOY) as are earnings. In fact, the company has posted six consecutive quarters of negative earnings per share and only one of those quarters saw the company beat revenue from the prior quarter.
That explains the reason behind SCWX stock going down over 25% in the past year. Also, it illustrates the fact that many investors may want to stay away. The stock is not widely covered by analysts. However, of the four that do track, the stock gets one sell and one strong sell rating.
On the date of publication, Chris Markoch 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.