Most companies have some debt, often accumulated during the low-interest rate environment from 2009 to 2021. Firms that are profitable may view debt positively, as a way to fund acquisitions, dividends and buybacks, making it easier for them to manage with relatively low carrying costs. However, for less profitable companies with high debt loads and slowing growth, a troubled balance sheet could mean bankruptcy. These three stocks to sell carry similarities in this regard.
Of course, speculative trades based on near-term momentum or dead-cat bounces is one thing. But trying to ride these stocks to sell to big gains could be a very dangerous game to play.
Fisker (FSRNQ)
Person holding cellphone with business logo of US electric vehicle manufacturer Fisker Inc. on screen in front of webpage. Focus on phone display. FSRN stock, Fisker stock
Source: T. Schneider / Shutterstock.com
Let’s kick off this list of stocks to sell with a company that’s actually in the middle of bankruptcy proceedings, shall we?
Fisker (OTCMKTS:FSRNQ) is a company with a “Q” at the end of its ticker for a reason. This company has filed for bankruptcy, after burning through a tremendous amount of cash, seeing recalls for its Ocean SUVs and continuously missing its production targets over time.
Like many early-stage EV makers, Fisker was initially promising. This was a company I liked when it put its offering out there. A low-priced electric SUV at the time was a product I thought could have taken significant market share over time.
However, as with other EV makers, not having the right mix of production and cost control over time was detrimental. There are so many other EV picks to choose from that could fall into the same boat. But this is definitely a penny stock to avoid right now, in my view.
Plug Power (PLUG)
Person holding smartphone with logo of US hydrogen fuel cell company Plug Power Inc. on screen in front of website. Focus on phone display. Unmodified photo. PLUG stock
Source: T. Schneider / Shutterstock.com
Announcing a $200 million public offering, Plug Power (NASDAQ:PLUG) certainly doesn’t look like a solid bet to investors. The proceeds of this offering will reportedly go toward general corporate purposes. However, investors don’t like what they’re seeing in terms of dilution. Subject to market conditions, this offering also has no guaranteed timing, size or terms. Those are the kinds of things that keep investors up at night, particularly with a company like Plug Power that has a balance sheet that’s wanting in many regards, with an uncertain long-term outlook.
Importantly, the recent discount PLUG stock saw relative to its offering price is worrisome to investors. As I pointed out recently, this hydrogen fuel cell producer saw a significant discount to this offer price materialize nearly immediately. This suggests that investors aren’t excited about the offering and what it may portend for the future.
Typically, companies looking to stabilize their balance sheets do so by diluting investors through continuous share issuances. If that’s the case, Plug Power is a stock that’s best to sell.
Sunpower (SPWR)
In this photo illustration, the SunPower Corporation logo is displayed on a smartphone screen. SPWR stock
Source: rafapress / Shutterstock.com
SunPower’s (NASDAQ:SPWR) stock plummeted 70% after the company recently ceased support for new leases, installations and shipments. Upon this news, a number of top analysts came through with predictions of the company’s imminent collapse. Shares dropped 93%, prompting Guggenheim Securities to cut its price target to $0, suggesting SunPower’s equity is worthless.
Guggenheim analysts predicted SunPower’s winddown, leading to asset sales and stock delisting. JPMorgan viewed the move as an indefinite suspension due to poor cash flow, balance sheet issues and regulatory non-compliance. Piper Sandler also halted coverage of the stock.
In 2023, SunPower installed 524 megawatts of systems, creating a chance for competitors like Sunnova (NYSE:NOVA), which is set to gain from its dealer-focused model. The residential solar sector struggled with high interest rates and excess inventory, exacerbated by persistent inflation and political uncertainty. Despite this, tax credits from the Inflation Reduction Act provided some support, though it’s clear those good days are over.
In my view, this is yet another struggling penny stock investors are better off looking past right now.
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On the date of publication, Chris MacDonald did not hold (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.
On the date of publication, the responsible editor did not have (either directly or indirectly) any positions in the securities mentioned in this article.
Chris MacDonald’s love for investing led him to pursue an MBA in Finance and take on a number of management roles in corporate finance and venture capital over the past 15 years. His experience as a financial analyst in the past, coupled with his fervor for finding undervalued growth opportunities, contribute to his conservative, long-term investing perspective.
