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3 'Sell'-Rated Tech Stocks Analysts Think You Should Avoid
Technology stocks are often seen as attractive investments, as they offer the potential for high growth and innovation. However, not all tech stocks are created equal, and some may not offer enough reward to be worth the risk.
In this article, we will look at three tech stocks that have received a relatively rare consensus “sell” rating from analysts. These stocks include an artificial intelligence (AI) lending platform that faces macro headwinds; an Indian IT giant that's bracing for lower revenue; and a U.S. cybersecurity company that's struggling to achieve profitability.
Tech Stock #1: Upstart Holdings
Upstart Holdings Inc. (UPST) is an AI platform that provides lending services to improve accessibility and affordability, while simultaneously reducing the risk factor and cost borne by its partner banks. Upstart uses advanced AI models to calculate the risk profiles of their consumers, in turn accepting more applicants than traditional banks. The company was founded in 2012, with its headquarters in California.
Upstart’s stock is up 73% over the past year, but still trades 54% below its 52-week high.
UPST reported its Q3 results back in November last year, and missed expectations on both earnings and revenue. The company posted a wider-than-forecast loss of $0.05 per share, while revenue decreased 14.42% YoY to $134.56 million, missing Wall Street's $140.26 million consensus.
During Q3, the company approved a total of 114,464 loans, resulting in $1.2 billion in credit - which is 34% less than what it had achieved last year. In addition, its conversion rate also dropped from 9.7 to 9.5.
Looking ahead, Upstart is projected for revenue growth of -8.37%, well below the sector median of 4.42%.
Analysts have a consensus “Moderate Sell” rating and a mean price target of $18.85, which translates to 42% expected downside from current levels. Among the 15 analysts in coverage, 7 have a “Hold” rating, 1 has a “Moderate Sell” rating, and 7 have a “Strong Sell” rating.
Tech Stock #2: Wipro Ltd.
Wipro Ltd. (WIT) is an India-based company that specializes in IT, business process outsourcing, and consultancy services. Headquartered in Bangalore, it provides services to various sectors globally, such as healthcare, banking and finance, engineering and construction, oil and gas, retail, aerospace and defense, and many more.
Wipro stock has gained more than 16% over the past year.
The company reported its Q3 results on Jan. 12, with earnings of $0.06 per share falling slightly short of analysts' estimates. Revenue of $2.67 billion came in slightly better than the consensus estimate of $2.66 billion.
Looking ahead, WIT guided for a sequential decline of 3.5% to 1.5% in IT Services revenue for the current quarter. Wipro's forward revenue growth is projected at 3.19% overall, lower than the sector median of 7.28%.
Analysts have a consensus “Moderate Sell” rating for the stock, with the mean price target of $5.08 reflecting 10.8% potential downside to current levels. Out of the 8 analysts tracking the stock, 1 has a “Strong Buy” rating, 1 has a “Hold” rating, 2 have a “Moderate Sell” rating, and 4 have a “Strong Sell” rating.
Tech Stock #3: Secureworks
Secureworks Inc. (SCWX) is a U.S. cybersecurity company operating in more than 50 countries. They provide cutting-edge technology to locate, prevent, and manage cybersecurity issues. They also provide SaaS solutions, security monitoring, log retention solutions, next-gen firewall solutions, and more. The company's clients range from mid-sized businesses to Fortune 100 companies.
The stock has dropped more than 5% over the past 52 weeks, and SCWX is down 74% from its 2021 highs.
Secureworks reported its Q3 results in early December, which came in stronger than forecast. The company broke even on a per-share basis, while revenue stood at $89.4 million, beating the estimate of $88.98 million. For the upcoming quarter, SCWX expects revenue in the range of $86 million to $88 million, and a loss per share ranging from $0.03 to $0.05.
Forward revenue growth for SCWX stands at -12.88%, considerably below the sector median of 7.28%.
Analysts have a bearish outlook on the stock, with a consensus “Moderate Sell” rating and a mean price target of $6.72. That indicates 3.2% potential downside to current levels. Out of the 4 analysts in coverage, 2 have a “Hold” rating, 1 has a “Moderate Sell” rating, and 1 has a “Strong Sell” rating on Secureworks.
On the date of publication, Ruchi Gupta 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.
