Dump These 2 Tech Stocks
Tuesday trading featured another gutless attempt by the bulls to prop up sagging stocks.
A quick morning rally fizzled before lunch and the major averages all finished near breakeven on the day. While popular momentum stocks continue to struggle, this bout of market weakness has hit small-cap stocks especially hard. The average S&P 600 Small-cap Index component is now down a gut-wrenching 20.7% from its 52-week high, according to Bespoke Investment Group.
That’s not a typo. The average small-cap is now in bear market territory!
Meanwhile, weak names continue to get weaker. In fact, a couple of high-profile IPOs are now locked in a race to zero…
Last week, we broke down the record number of unprofitable IPOs hitting the market this year. According to the numbers, more than 80% of new listings this year have been for companies that have found a way to lose money over the past 12 months. That’s the highest proportion of money-losing initial public offerings on record, just beating out the high-water mark set before the dot-com implosion.
But a lack of profits hasn’t deterred speculators. As of last week, money-losing IPOs were up an impressive 36% on the year. At the time, we noted that buying unprofitable new stocks is a solid strategy… until it isn’t.
Thanks to a couple of nasty breakdowns, we’re already beginning to see these stories unravel.
Social media also-ran Snap Inc. (NYSE: SNAP) is apparently running out of money, according to a widely-circulated research report from MoffettNathanson that hit the wire yesterday.
“In order to reach Chief Executive Officer Evan Spiegel’s goal of profitability in 2019, Snap would need to grow ‘massively faster’ than expected and cut costs aggressively,” Bloomberg reports. That will lead to losses of more than $1.5 billion next year, as SNAP “looks to rebuild its user base.”
SNAP shares have careened lower for the better part of the past three months — but this latest bearish report punched the stock’s ticket to new all-time lows. SNAP fell more than 6% on the day, effectively slicing the company’s market value in half from its June highs.
Not to be outdone, meal-in-a-box purveyor Blue Apron Holdings (NYSE: APRN) also lost more than 6% during Tuesday’s trading session. To be fair, smoke has been billowing from Blue Apron’s kitchen since the stock’s first day on the NYSE last summer.
You might remember that management cut its IPO range buy a few bucks due to soft institutional demand. It finally landed on the NYSE at $10 per share — a big disappointment at the time. Today, it trades for just over a buck.
When APRN first hit the market, I couldn’t quite wrap my head around why anyone would want to buy shares. But the story has unraveled much faster than I ever thought possible…
So far, Blue Apron is winning the race into oblivion. Since the stock debuted in June 2017, it has lost more than 85% of its value. SNAP is down just about 60% over the same timeframe (its fate was spared for a hot second thanks to a quick rally earlier this year).
Bottom line: SNAP and APRN might not be long for this earth. There are plenty of falling knives we should be avoiding in this market. These two names are at the top of the list.
For Technology Profits Daily,
Chief Trading Expert
Editor’s note: Ray’s shown over and over again there are plenty of profits to score in the market on any given day.
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