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An “advance cat bounce” occurs when a declining stock makes a small rally but is likely to decline further. This belief is rooted in the saying, “Even a dead cat will bounce back if it falls from a height.” There are many ups and downs in the stock market. It does not travel in a straight line. So, especially in the current market, investors would be better off knowing which stocks are dead cats rather than comeback bids.
In the coming months, many stocks with terrible fundamentals could fall significantly. Selling these equities before the rest of the market seems like the best course of action in my opinion.
Still, this is the stock market, after all. In fact, if you’re running low on any of these companies, I’d advise caution. With that said, for those debating whether or not to buy into this dead cat bounce, here are three stocks to sell.
3 stocks will be removed before going down again
Calix (CALX)
Source: Shutterstock / Steve Heap
Broadband service providers can use the software and cloud platform offered by Calix (NYSE:CALX). Calix, which was one of the best performers in the pandemic, has lost its appeal after falling 54% from its peak. I think this former high achiever has more misery in store.
In Q1, Calix’s top line fell 9.5% year-over-year to $226.3 million, missing sales estimates by nearly 1%. According to management, large clients are reevaluating their capital investment plans and this trend is expected to continue in Q2.
This year, analysts predict that Calix’s earnings per share will fall by a staggering 64%, along with an 18% decline in revenue. Although a reprieve is expected in 2025, projections are declining rapidly. Analysts have cut year-end sales estimates by 10% and earnings per share expectations have nearly halved in just the past ninety days.
Calix asserts that the company will benefit greatly from the government’s impending BEAD incentive package. But with BEAD not expected to be funded until 2025, I think investors would be wise to exit this floundering tech brand before further negative revisions hurt it.
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Plug Power (PLUG)
Source: Shutterstock.com / T. Schneider
A system that uses hydrogen fuel cells is produced by Plug Power (NASDAQ:PLUG) for electric cars. The company’s stock has plummeted since peaking three years ago during the EV boom. Due to the lack of sales in the current economic climate, many automakers may decide to exit the EV business. A potential rate cut from the Federal Reserve could see some EV manufacturers experience a resurgence, though I don’t see Plug Power benefiting from that. The financial condition of the company is appalling. Plug’s Q1 sales report was dire, as it fell 43% year-over-year to just $120 million.
Plug’s net loss for the full quarter widened dramatically to $296 million. Additionally, there is now only $173 million in cash.
The chart was provided by gurufocus.com.
The company doesn’t expect to turn a profit until 2027 in a worst-case scenario, and that’s assuming big producers adopt its hydrogen technology. It looks like a huge if. For this reason, Plug Power is one of my top stocks to sell because it looks like a sinking ship.
Accelerate Diagnostics (AXDX)
Source: Shutterstock
A system for rapid assessment of antibiotic susceptibility is produced by Accelerate Diagnostics (NASDAQ:AXDX). It is a business that aims to address antibiotic resistance. This is a significant global problem, but I’ll explain why it may not be the ideal market to focus on in a moment.
Although the share price has risen marginally by 40% in the past month, I think this is a dead cat bounce before the market goes even lower.
Revenue in Q1 rose a miserable 3.9% on a year-over-year basis to just $2.9 million. Gross margin fell from 36% to 25%. Moreover, the business is still losing money. Recently, Accelerate reported a net loss of $14.2 million.
I don’t think management’s hype about its Wave platform is true. Even if Wave is authorized, the potential market is small because antibiotic resistance is mostly a problem in underdeveloped nations. Furthermore, pre-clinical testing has already been delayed due to contractual concerns. I expect more delays in the future. Additionally, the company’s Altman-Z score is falling.
The chart was provided by GuruFocus.com.
Given that AXDX’s price has dropped by an astounding 88% in the last year and that the company’s fundamentals are not improving, I believe this is one of the best stocks to sell.
Omor Ibne Ehsan did not possess any positions in the securities mentioned in this article, either directly or indirectly, as of the publishing date. The author’s opinions are stated in this post, in accordance with the InvestorPlace.com Publishing Guidelines.
Writer Omor Ibne Ehsan works at InvestorPlace. As an investor, he learned the trade on his own and specializes in growth and cyclical firms with solid fundamentals, good value, and promising future returns. Additionally, he is interested in high-risk, high-reward ventures like penny stocks and cryptocurrencies. You are able to follow him on LinkedIn.
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