Sell ​​alert: 3 problematic tech stocks you should get rid of now

For investors looking to preserve their capital, identifying stocks to sell is crucial. That may mean rebalancing your portfolio occasionally or, if the situation is serious enough, getting rid of some stocks altogether. And given the current bullish momentum in the tech industry, I bet most of you have a few tech stocks in your portfolio because they offer great returns.

However, a sudden market downturn can also lead to massive (and disproportionate) sell-offs in the technology industry, so it might be best to remove troubled tech stocks from your portfolio now.

Who knows? Maybe you’re holding one on the brink of a historic crash – and nobody wants that.

So today I’ve identified three technology stocks that have the potential to fall further once the market turns bearish. To compile this list, I examined the market using the following criteria:

• Hold to strong sell rating from analysts,
• Decline in profit and sales in the latest annual report,
• Trades for $10 and above.

I then sorted the top three results from the largest to the smallest drop in sales. Here are the results.

Upstart Holdings (UPST)

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Upstart investments (NASDAQ:UPST) provides a platform that offers personal loans, auto loans, refinance loans and other financial products.

The company uses AI to connect lending partners such as merchants and lenders with consumers. Its software uses cloud-native technology that enables evolution and configurability of its multi-tenant architecture.

While that sounds great, Upstart Holdings’ finances were not doing well. Its fiscal 2023 report pointed to a 39% decline in revenue to $514 million, with fee revenue down 38%. Transaction volume fell 59%, while rate request conversion fell to 9.7% from 14.1% the previous year.

The net loss also rose from $109 million to $240 million. So overall, this was not a good result.

Even more alarming, the company only expects revenue of around $125 million for the second quarter of 2024 – the same as the first quarter. If nothing changes in the next two quarters, Upstart may only be able to report revenue of $500 million for 2024, which would mark another potential year-over-year decline.

While Wall Street rates UPST stock as a “hold,” the losses and negative financial forecast no longer paint a rosy picture for the future.

iRobot (IRBT)

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I robot (NASDAQ:IRBT) specializes in building household robots that help with everyday tasks such as cleaning and navigation. The company’s best-known product, the Roomba, is a robot vacuum cleaner for wet and dry cleaning.

iRobots’ product lines include Braava, Root, Braava Jet and Roomba Combo. The company also offers ongoing support through the iRobot HOME app and sells accessories and supplies through its online store and retail channels.

As exciting as iRobot’s products sound, the company is having a hard time on the market, and the reasons for this are easy to see: the competition in this area is fierce.

In its 2023 report, the company reported a 25% drop in revenue from $1.2 billion to $890.6 million. The bottom line is no better: net losses rose to $11.01 per share, compared to the loss of $10.52 a year earlier.

Despite the launch of new products and a strategic leadership change with the appointment of Gary Cohen as CEO, sales declines in key regions and ongoing market challenges highlight the precarious state of iRobot’s business.

Investors may need to wait for analysts to consider increasing their hold rating on IRBT. Or perhaps it’s wiser to avert the inevitable and sell IRBT shares along with the other troubled tech stocks on this list.

Universal Electronics (UEIC)

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Universal Electronics (NASDAQ:UEIC) specializes in IoT devices and wireless universal control solutions. Its flagship product, QuickSet, is an app that can be used in any smart home or entertainment platform. It can be accessed via the cloud and set up interoperably. Its other products also use infrared remote controls, radio frequencies, and voice-controlled technology.

Universal Electronics is in a downward spiral. In 2023, the company reported revenue of $420.5 million, down 23% from the previous year’s $542.8 million. Gross margins continue to decline, from 28.1% to 23.2%. Meanwhile, the bottom line plummeted from a profit of 3 cents per share to a catastrophic loss of $7.64 due to a non-cash charge.

Despite secured projects and continuous investments in climate control and home automation, these figures are alarming.

Analysts understandably rate URIC stock as a Hold, but given its weak performance and flat-to-negative outlook, UEIC could be one of those troubled tech stocks you’d be better off getting rid of for now.

At the time of publication, Rick Orford had no position (either directly or indirectly) in the securities mentioned in this article. The opinions expressed in this article are those of the author and are subject to InvestorPlace.com Publishing guidelines.

At the time of publication, the editor in charge did not hold any positions (either directly or indirectly) in the securities mentioned in this article.