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3 'Sell'-Rated Russell 2000 Stocks Analysts Think You Should Skip
While the equity markets have the potential to deliver inflation-beating returns over time, just a handful of stocks consistently outpace the broader indices. Yes, it is important to gain exposure to equities as an asset class. But it's just as crucial to understand that you need to stay away from companies that are unprofitable or have weak fundamentals.
With this in mind, here are three “sell”-rated stocks from the small-cap focused Russell 2000 (RUT) that have captured the attention of growth-minded investors - but Wall Street analysts think these names are set to decline from here.
Beyond Meat Stock
Beyond Meat (BYND) went public in June 2019, and soon surged to all-time highs as investors were optimistic about its stellar growth rates and rapidly expanding addressable market. Today, BYND is valued at a market cap of $477 million, and trades 97% below record levels.
In the last 12 months, Beyond Meat reported revenue of $350 million, down from $465 million in 2021. Lower consumer spending and other macro headwinds in the U.S. dragged the company's retail sales in the country lower by 34% year-over-year in Q3.
BYND remains unprofitable, and is forecast to end 2023 with adjusted losses of $3.74 per share, compared to losses of $5.75 per share in 2022. What concerns investors is that Beyond Meat is unprofitable on a “gross margin basis,” resulting in an EBITDA (earnings before interest, tax, depreciation, and amortization) loss of $57.5 million.
Due to its high cash burn rates, Beyond Meat’s cash balance fell to $217.5 million in Q3 from more than $1 billion three years back.
Out of the 12 analysts covering Beyond Meat stock, six recommend “hold” and six recommend “strong sell,” for a consensus rating of “moderate sell.” The average target price for BYND is $5.89, about 20% below current levels.
Upstart Stock
Upstart (UPST) is part of the lending sector, which is highly cyclical. After growing sales from $233 million in 2020 to $848 million in 2021, its top line has fallen to $515 million over the last four quarters. Valued at $2.65 billion by market cap, Upstart stock is down 92% from all-time highs.
The company aims to disrupt the legacy lending process using a cloud-based, artificial intelligence (AI)-powered platform, resulting in higher efficiencies for its lending partners. In Q3 of 2023, around 88% of its loans were completely automated, up from 75% in the year-ago period.
Higher interest rates have created a tepid lending environment, resulting in a headwind for Upstart in recent quarters.
Out of the 15 analysts covering UPST, one recommends “strong buy,” six recommend “hold,” one says “moderate sell,” and seven suggest “strong sell.” The average target price for UPST is $19.15, implying about 38% expected downside.
Big Lots Stock
The final stock on my list is Big Lots (BIG), a company that operates in the discount retail segment. It acquires excess inventory, which is then sold at a steep discount compared to other retail outlets.
Over the past year, BIG has lagged the broader market considerably by losing 60% of its value.
In the September quarter, Big Lots reported revenue of $1.03 billion, down almost 15% compared to the year-ago period. Big Lots is forecast to end 2023 with adjusted losses of $11.18 per share, wider than its loss of $5.96 per share in 2022.
Out of the eight analysts covering BIG stock, four recommend “hold,” one recommends “moderate sell,” and three recommend “strong sell.” The average target price for BIG is $5.20, indicating expected downside of 16.4% from current levels.
On the date of publication, Aditya Raghunath did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
