Ticking Time Bombs: 3 Nasdaq Stocks to Dump Before the Damage Is Done

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Josh Enomoto

Sat, Sep 30, 2023, 2:19 PM 4 min read

Another reason to target Nasdaq stocks to sell centers on basic realities. Consider a chess game – unless both sides are committed to a pure draw for some reason, the pieces will not stand as they are. Instead, with competitive chess, it’s not about if you lose pieces but which ones and under what circumstances.

So it is with the market. If you want consistent success, you can’t just be an indefinite buy-and-hold investor. At some point, you will have to let go of your stinkers. With that, below are three possible Nasdaq stocks to sell.

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Nasdaq Stocks: United Fire Group (UFCS)

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At first glance, United Fire Group (NASDAQ:UFCS) doesn’t seem a natural candidate for Nasdaq stocks to sell. As an insurance company, United Fire primarily offers property and casualty insurance through its subsidiaries. Unfortunately, the myriad difficulties associated with the post-pandemic recovery process have left UFCS in a bind. Since the start of the year, shares fell nearly 29%.

Even worse, they’re down 32% over the trailing one-year period. One factor to watch out for is the options arena. Specifically, the implied volatility (IV) curve screams upward in the far out-the-money (OTM) direction, peaking at 469%. On the other hand, IV only rises to 169% toward the far OTM call direction. Put another way, traders appear to be hedging for tail risk. Also, United’s financials don’t provide much encouragement. For example, its three-year revenue growth rate slips to 6% below breakeven. It also suffers from negative net margins.

Finally, Piper Sandler analyst Paul Newsome pegs UFCS a “moderate sell” with a $19 price target, implying almost 4% downside.

Veritone (VERI)

a keyboard with a greet enter key marked sell, representing overvalued stocks to sell

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Based in Irvine, California, Veritone (NASDAQ:VERI) is an artificial intelligence-focused technology firm that provides computing solutions through its proprietary platform aiWARE. The underlying system integrates a range of machine learning models to process and transform unstructured data – like audio, video, and text – into structured data automatically. Notably, this has significant implications for everyday functionality.

As an example, in the media and entertainment space, Veritone allows for easy content classification, ad verification, and content monetization. Additionally, it can be used for serious needs such as predictive maintenance for infrastructure. Despite extraordinary relevancies, VERI hasn’t caught on with Wall Street, with shares down over 50% since the January opener. To be fair, it has some positives such as solid revenue growth. However, it also suffers from severely negative operating and net margins. Also, its Altman Z-Score of 1.49 below zero indicates deep distress.

Lastly, analysts peg VERI as a moderate sell with a $2.50 target, implying nearly 4% downside risk. Thus, it’s probably one of the Nasdaq stocks to avoid.

AudioCodes (AUDC)

sell written on a chalkboard representing overvalued stocks to sell

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Hailing from Israel, AudioCodes (NASDAQ:AUDC) held much promise during the early phase of the Covid-19 pandemic. With its advanced communication software, products, and services for enterprises and service providers, the company cut a utilitarian profile. However, when the calendar turned to 2022, the dramatic rise in inflation devastated AUDC. Since the January opener, it plunged nearly 43%.

Looking back over the past 52 weeks, AUDC dropped almost 55% in equity value. A key factor here may be the options market. Looking at AUDC’s IV curve, the metric peaks at 150% in the OTM put direction. On the other side of the fence, IV rises to a max of 110% in the OTM call direction. Again, it appears that traders are hedging for tail risk.

Financially, AudioCodes doesn’t seem too bad. With a strong balance sheet and consistent profitability, one might wonder what the fuss is about. However, AUDC could be one of the Nasdaq stocks to sell because of a conspicuous erosion of the top line.

In closing, analysts peg AUDC as a moderate sell with an $8.50 target, implying over 15% downside risk.

On the date of publication, Josh Enomoto 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.

A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare. Tweet him at @EnomotoMedia.