Like many investors, Cathie Wood didn’t have a great 2022. In fact, her flagship ARK Innovation ETF (NYSEARCA:ARKK) was down about 67% over the last 12 months, as of Jan. 31. Sure, much of the downside was a result of excessive market bearishness, but Wood also made some bad picks along the way. For example, some of the top Cathie Wood stocks to sell have included Palantir (NYSE:PLTR), whose competitive advantages were overly exaggerated and were unprofitable after many years in business, as well as Virgin Galactic (NYSE:SPCE), whose value proposition and ability to execute were always highly questionable at best.
And of course, Wood has become famous for her bullishness about crypto, whose bubbly status was always clear to me. Even her Teladoc (NYSE:TDOC) pick was doomed by intense competition and a lack of real comparative advantages. (ARKK still owns some TDOC, but its valuation is much lower now). Sure, Wood has gotten rid of many of her bad picks, but several still remain. In fact, let’s take a look at three other Cathie Wood stocks that have zero chance of ending the year higher. I suggest that investors avoid these equities at all costs. Risk-tolerant investors can consider shorting them.
| U | Unity Software | $41.78 |
| RBLX | Roblox | $38.33 |
| COIN | Coinbase | $64.23 |
Cathie Wood Stocks to Sell: Unity Software (U)
One of the top Cathie Wood stocks to sell is Unity (NYSE:U), which develops video game software, and allows developers to monetize games. Unfortunately, the stock has been struggling. In fact, since the start of Jan. 2022, the stock fell from about $147 to a recent low of $41.07. Not helping, overall video game sales were down 5% year over year, according to the Entertainment Software Association and the NPD Group.
In addition, the downward trend in video game sales is likely to continue, especially with pandemic fears cooling off. Making matters worse, Unity’s third-quarter loss from operations recently jumped to $240 million, or 74% of its revenue, from $127 million year over year. By the fourth quarter, its loss from operations was $144.8 million, or 46% of revenue, compared to a loss of $80.8 million, year over year. For the full year, the company’s loss from operations was $531.7 million, or 48% of revenue, as compared to a loss of $274.8 million year over year.
Roblox (RBLX)
Another one of the top Cathie Wood stocks to sell is Roblox (NYSE:RBLX). For one, it’s a vastly overvalued company that’s operating in the struggling video game sector. Trading with an elevated trailing price-sales of 10.3, RBLX stock’s inflated valuation also reflects lingering optimism about the metaverse. However, I’ve expressed pessimism about the metaverse for many months. For example, I’ve noted that the metaverse has been around for decades without making much of an impact on any company’s top or bottom line. Nowadays, with even the enthusiasm of Mark Zuckerberg waning, my skepticism appears to have been justified.
I’m also bearish on RBLX after Bank of America’s forecast for spending on video games to fall 1% to 3% this year. Also, on Jan. 19, Morgan Stanley cut its rating on RBLX stock to “underweight” from “equal weight,” citing valuation and its belief that the company’s growth would likely decelerate in the second half of this year. Worse, in Nov., Roblox’s bookings per user dropped 5%-7% year-over-year, and its overall bookings increased an anemic 5%-7% YOY. And in December, the firm estimated that its revenue had dropped 1%-6% YOY, even though its daily active users jumped 18% year over year.
Coinbase (COIN)
Coinbase is another one of the top Cathie Wood stocks to sell. In the wake of FTX’s implosion and improprieties, along with multiple other bankruptcies in the crypto space, I believe many traders will become nervous about buying cryptos on exchanges. Also likely to deter investors from buying cryptos is the fact that they remain well off their highs. And of course, curtailed trading of cryptos will negatively impact Coinbase’s (NASDAQ:COIN) financial results and COIN stock.
Supporting my thesis, Robinhood (NASDAQ:HOOD), which is another one of Cathie Wood’s stocks, reported on Feb. 8 that its revenue from cryptocurrency trading had plunged 24% in Q4 versus Q3 to just $39 million. Meanwhile, COIN is being probed by the U.S. SEC, and one of its former managers has pleaded guilty to insider trading. I wouldn’t be shocked if the former employee cooperates with the government’s probe of the company, making its legal troubles worse.
And if all that isn’t enough to make you bearish on COIN, consider that there are rumors that the SEC could ban crypto staking, an income-generating practice by consumers that have become an important revenue source for Coinbase. In a recent comment, COIN CEO Brian Armstrong did not try to refute the rumor but only said that he hopes it isn’t true. On top of it all, Armstrong has been selling significant amounts of COIN stock on many occasions so far this year, showing a lack of confidence in its shares.
On the date of publication, Larry Ramer had a short position in COIN. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.