In the realm of investing, penny stocks can be misleading with their low price tags. It’s important to understand that a low price doesn’t always equate to a high upside. Therefore, knowing which penny stocks to sell is crucial in today’s market, with many of these stocks carrying inflated valuations, making their potential returns highly uncertain.
The waning of macroeconomic worries has led to a major shift toward riskier investments. As a result, high risk penny stocks that lack solid fundamentals have experienced a surge. However, market volatility makes this trend debatable as a reversal could hit speculative names the hardest.
In light of this, investors might consider parting ways with more precarious assets. Therefore, today we will discuss penny stocks to sell, to ensure portfolio resiliency amidst the potential market volatility.
AMC Entertainment (AMC)
AMC Entertainment (NYSE:AMC) is a high-risk meme stock that is traversing a rocky road to recovery. The cinema chain is in major duress with a towering debt of more than $4.8 billion and lackluster first-quarter sales lagging far behind pre-Covid levels. Even as moviegoers gradually return, AMC remains one of the more precarious stocks that investors should avoid.
Adding to the complexity is the rise of streaming services and evolving consumer habits. While a potential resurgence for AMC is not entirely out of reach, it has faded from the meme stock limelight. The stock nosedived more than 50% in the past year, with its future marred by volatility.
Despite its reported increase in first-quarter revenues, AMC’s growth is predominantly attributed to the lingering effects of the pandemic rather than a genuine turnaround. Compared to previous years, a decline in first quarter revenues emerges, indicating that AMC is moving in the wrong direction. Given these challenges and unfavorable market conditions, investing in AMC would not be prudent for investors seeking stability and long-term growth.
Newegg Commerce (NEGG)
Newegg Commerce (NASDAQ:NEGG) though not as widely recognized among retail traders as AMC, had its brief moment of glory among meme stock enthusiasts. However, those days are long gone, and with its stock hovering above $60 per share during the height of the meme era, NEGG stock now rests around a meager $1 per share. Moreover, with a massive swing towards unprofitability in 2022 and expectations of further losses in 2023, NEGG’s low price tag doesn’t compensate for its lackluster earnings.
Compounding the issue is that the stock still trades by more than 21 times its book value, making it far from a bargain when considering underlying assets. With weak fundamentals and a lack of promising prospects, and despite its attempts to tout its generative artificial intelligence credentials, Newegg is one of the penny stocks to avoid.
Investors are scrutinizing SmileDirectClub (NASDAQ:SDC) and the diagnosis is far from rosy. Once the darling of the pandemic era, its novel approach to orthodontics led to a massive initial surge in its stock price. However, with life returning to normalcy, the appeal of this teledentistry business seems to be losing its bite. The steep drop in sales is a potent reminder of the fickle nature of trend-driven markets, inevitably leading to uncertainty about SDC’s long-term profitability.
Further aggravating these concerns is a recent legal mandate compelling SDC to cut loose 17,000 discontented customers from their nondisclosure agreements. These customers are now free to air their grievances in the public domain, weighing down the SDC stock narrative. Hence, the road ahead appears to be laden with challenges for SmileDirectClub, which investors would do well to consider.
On the date of publication, Muslim Farooque 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