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Growth is a hallmark of all great companies, but the laws of gravity eventually take hold. Those who rode the COVID boom and ensuing tech selloff in 2022 will surely remember that the market’s punishment can be swift and severe when trajectories fall.

The risks that can come from buying these assets is precisely why we started StockStory - to isolate the long-term winners from the losers so you can invest with confidence. That said, here is one growth stock expanding its competitive advantage and two climbing an uphill battle.

Two Growth Stocks to Sell:

Lucid (LCID)

One-Year Revenue Growth: +40.7%

Founded by a former Tesla Vice President, Lucid Group (NASDAQ:LCID) designs, manufactures, and sells luxury electric vehicles with long-range capabilities.

Why Does LCID Worry Us?

1. Negative gross margin means it loses money on every sale and must pivot or scale quickly to survive

2. Cash-burning tendencies make us wonder if it can sustainably generate shareholder value

3. Limited cash reserves may force the company to seek unfavorable financing terms that could dilute shareholders

At $2.82 per share, Lucid trades at 4.9x forward price-to-sales. To fully understand why you should be careful with LCID, check out our full research report (it’s free).

Sphere Entertainment (SPHR)

One-Year Revenue Growth: +23.5%

Famous for its viral Las Vegas Sphere venue, Sphere Entertainment (NYSE:SPHR) hosts live entertainment events and distributes content across various media platforms.

Why Do We Avoid SPHR?

1. 2.4% annual revenue growth over the last five years was slower than its consumer discretionary peers

2. Negative free cash flow raises questions about the return timeline for its investments

3. Short cash runway increases the probability of a capital raise that dilutes existing shareholders

Sphere Entertainment’s stock price of $38.05 implies a valuation ratio of 7.7x forward EV-to-EBITDA. Dive into our free research report to see why there are better opportunities than SPHR.

One Growth Stock to Watch:

AMD (AMD)

One-Year Revenue Growth: +21.7%

Founded in 1969 by a group of former Fairchild semiconductor executives led by Jerry Sanders, Advanced Micro Devices (NASDAQ:AMD) is one of the leading designers of computer processors and graphics chips used in PCs and data centers.

Why Do We Like AMD?

1. Impressive 30.8% annual revenue growth over the last five years indicates it’s winning market share this cycle

2. Projected revenue growth of 16.4% for the next 12 months indicates demand will rise above its two-year trend

3. Earnings growth has massively outpaced its peers over the last five years as its EPS has compounded at 37.2% annually