- June is a good time to sell large-cap stocks that may not be able to create much shareholder value in the second half of the year.
- Coinbase Global (COIN): The crypto exchange is likely to stay volatile as digital assets decline further.
- Roblox (RBLX): Revenue growth is on the decline and Roblox has no definite path to profitability soon.
- Workday (WDAY): Despite the recent decline in the WDAY share price, valuation remains frothy.
Last week marked the seventh consecutive week that the S&P 500 fell. Since January, the index has lost around 17% of its value. Investors are still jittery going into June as they do not want to catch falling knives. Meanwhile, the Federal Reserve reminds Wall Street that the average inflation target remains at 2%.
On May 4, the Federal Open Market Committee statement cited: “The Committee would be prepared to adjust the stance of monetary policy as appropriate if risks emerge that could impede the attainment of the Committee’s goals.”
Put another way, the central bank stands ready to increase rates further while tightening its balance sheet. Thus, in May, many shares have suffered from a selling frenzy. Yet, as rates increase, analyst estimates for many growth shares are likely to see further downward revisions.
Therefore, June may be a good time to review portfolios. Especially large-cap stocks, or those corporations with market capitalizations (caps) of at least $10 billion, that seem risky, overvalued or without a clear path to profits.
Here are my top three large-cap stocks to sell now:
|COIN||Coinbase Global, Inc.||$73.41|
Large-Cap Stocks to Sell: Coinbase Global (COIN)
- 52-week range: $40.83 – $368.90
Coinbase released first quarter (Q1) 2022 results on May 10. Net revenue came in at $1.16 billion compared to $1.6 billion in Q1’21. Net loss hit $430 million, whereas net income was $771 million a year ago. As a result, net loss per diluted share was $1.98.
Meanwhile, the number of Monthly Transacting Users dropped by 19% to 9.2 million. According to management, these poor results were anticipated in the face of declines in cryptocurrencies.
Since January, COIN stock has declined 71% down year-to-date (YTD). Shares are trading at 1.64 times sales. The median price forecast for Coinbase Global stands at $117.50.
- 52-week range: $21.65 – $141.60
Next up is Roblox (NYSE:RBLX), the interactive entertainment platform that is mainly frequented by teenagers. The current market cap is $17.7 billion.
This gaming platform was one of the companies that benefited from the pandemic by adding millions of daily active users (DUAs) to its base. However, as life returns to normal, growth is stalling, which is reflected in the recent metrics.
Roblox reported Q1 results on May 10. Revenue increased 39% to $537.1 million in Q1’21. Despite the increase in the number of DAUs, bookings decreased by 3% compared the year-ago quarter. Net loss per share, basic and diluted, was 27 cents. Free cash flow (FCF) was $104.6 million.
Wall Street is concerned that management offers no timeframe for profitability. As the sales growth diminishes, not much positive news is likely in the rest of the year.
RBLX stock has dropped 64% YTD. Shares are trading at 65.8 times forward earnings and 8 times sales. Meanwhile, the median 12-month price forecast for Roblox stock is $39.
Large-Cap Stocks to Sell: Workday (WDAY)
- 52-week range: $149.06 – $307.81
Our last stock for the day is Workday (NASDAQ:WDAY), a major player in enterprise cloud applications for finance operations and human resources. Its market cap is $39.51 billion.
On Feb. 28, Workday announced Q4’22 metrics. Revenue totaled $1.38 billion, up 21.6% year-over-year. Adjusted net income per share was 82 cents compared to 77 cents for the prior year.
Workday has benefited from the work-from-home trend of the pandemic and increased its reach to around 10,000 organizations worldwide. However, as economies take a breather, future growth is likely to be already factored into the share price. Meanwhile, it faces competition from other enterprise software giants, including Oracle (NYSE:ORCL), SAP (NYSE:SAP), and Microsoft (NASDAQ:MSFT).
WDAY shares are down by 35% this year. However, despite the decline, shares are changing hands at 47.39 times forward earnings and 8.5 times sales. Finally, the median price forecast for WDAY stock stands at $220.
On the date of publication, Tezcan Gecgil did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.