Exit Alert: 3 Stocks to Sell Before the Downturn Exit Alert: 3 Stocks to Sell Before the Downturn

Knowing when to sell a particular stock can be just as important in investing as knowing when to buy it. The focus here is on identifying stocks to sell during market downturns, as this is crucial to mitigating potential financial risks when investing.

Three of the companies identified are suffering from rising operating costs and severe market hurdles due to market volatility and economic concerns, which reduces the attractiveness of owning their shares in the long term. It is important to understand these processes, as demonstrated by the financial imbalance that puts pressure on profitability. Likewise, supply chain constraints, rising costs and product dependency increase profitability risk.

In addition, it is understandable that conservative production targets and high fixed costs would hinder the company’s fundamental ability to grow and successfully gain market share. Investors can protect their portfolio from a market downturn by monitoring key indicators such as rising costs, supply chain constraints and cautious growth forecasts.

IonQ (IONQ)

Source: Amin Van / Shutterstock.com

IonQ (NYSE:IONQ) is a leader in quantum computing and related solutions for multiple industries. IonQ’s revenue for the first quarter of 2024 was $7.6 million, up 77% from $4.3 million in the first quarter of 2023. The company’s operating expenses (operating cost) has increased dramatically. Total operating expenses and costs in the first quarter were $60.5 million, an 87% increase from the $32.3 million spent in the first quarter of 2023. Of course, operating expenses are growing faster than revenue, which is hindering the increase in operating income. This increase in costs is primarily due to research, sales and marketing.

Furthermore, this means that rising costs are putting pressure on the company’s profitability despite increased sales. In particular, research costs increased by 99%. These costs exploded from $16.2 million to $32.4 million, a doubling. In addition, there was a massive increase in sales and marketing costs by 151%, almost tripling from $2.7 million to $6.7 million.

Overall, IonQ is one of the best stocks to sell as operating expenses have increased significantly without a commensurate increase in revenue. This could fundamentally limit IonQ’s potential for rapid expansion.

Eli Lilly (LLY)

Source: shutterstock.com/Michael Vi

Eli Lilly (NYSE:LLY) dominates the development, production, and distribution of drugs and related products. The company’s revenue growth in Q1 2024 was mainly driven by a few products, namely Zepbound and Mounjaro. The 26% increase in revenue was primarily driven by its diabetes and obesity drugs, with Mounjaro alone generating $1.8 billion globally in Q1 2024, up from $568 million in Q1 2023. This extreme dependence is dangerous. Eli Lilly is experiencing supply chain issues despite robust demand, particularly for its fast-growing drugs.

In addition, Eli Lilly’s expenses have increased significantly, which can impact profitability, increasing 12% in the first quarter of 2024 due to rising salary and benefit expenses and promotional initiatives. Higher development spending on late-stage assets and investments in early-stage research – including a one-time $75 million charge to terminate the Verzenio prostate program – drove a 27% increase in research spending.

In summary, Eli Lilly is one of the stocks most likely to sell due to its reliance on a few products, supply chain bottlenecks, and rising costs and expenses.

Lucid Group (LCID)

Source: Tada Images / Shutterstock

Electric vehicle (EV) manufacturers Lucid Group (NASDAQ:LCID) hopes to be competitive in the expanding industry. Lucid expects to produce about 9,000 vehicles in 2024, in line with its previous projections. While that number seems stable, it suggests a cautious production growth rate given the increasing demand for electric vehicles (EVs).

In addition, this cautious increase in production could pose a serious obstacle to gaining greater market share and meeting future demand. Gross margin could remain flat in the second quarter despite price changes, suggesting that cost optimization efforts need to be stepped up.

In addition, the margin could be further impacted by forecasted increases in impairments based on cost and net realizable value (LCNRV) as well as higher depreciation due to the activation of the production facilities in Phase 2. The company’s adjusted EBITDA loss in the first quarter was $598.4 million, a slight increase from $604.6 million in the fourth quarter. Although there is a slight improvement, the continued high EBITDA losses indicate severe financial difficulties. Therefore, these losses are concerning given the growing rivalry and the significant capital expenditures required to scale production and generate profits.

At the time of publication, Yiannis Zourmpanos did not hold (directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the author and are subject to InvestorPlace.com’s disclosure policies.