The future of the U.S. economy appears to be marked by significant challenges, as the national debt has surged to nearly $34 trillion. Amidst this economic backdrop, a majority of Americans, including voters from all parties, express negative sentiments about the state of the economy, highlighting the complexity and urgency of addressing the nation’s financial outlook. With this current state, go against market behavior and bet against these contrarian stocks.
Rivian Automotive (RIVN)
Rivian Automotive (NASDAQ:RIVN) is an electric vehicle and automotive technology manufacturer. Yahoo! Finance has 26 analysts predicting a one-year price range on RIVN between $15.00 and $40.00, with a mean of $26.40.
Rivian’s financials are not good. While the company reports $1.34 billion in revenue for Q4 2023, a 149.4% one-year CAGR, this has come at the expense of profitability. Significant issues with profitability are seen through a -$1.37 billion net income and -102.2% net profit margin. Management’s ability to generate returns on investments is lacking, with -$432 million in cash from investing and $9.13 billion in total assets, shrinking 31.1% YoY.
Rivian’s greatest concern at the moment is its profitability. With total liability growth (60.1%) outpacing its asset growth (-13.1%) so quickly, it makes recovering from large amounts of debt seem uncertain. Rivian is also facing numerous customer complaints about recharging and other manufacturing complications, resulting in vehicle recalls for the company. The company recalled over 13,000 vehicles in 2023 with its car production doubling YoY, raising concerns about the company’s quality assurance.
Rivian is on our list of 2024 contrarian stocks because of its quality-control recalls, profitability concerns and more.
Unilever (UL)
Unilever (NYSE:UL) is a world-leading consumer goods company. Yahoo! Finance has two analysts predicting a one-year price range on UL to be between $44.00 and $52.00, with a mean of $48.00.
UL financials appear strong. The company reports $16.7 billion in revenue for Q4 2023, growing at a 2.7% one-year CAGR. However, analysts’ projections for future revenue growth are not promising. FWD revenue growth and EPS growth are well below the sector median. Additionally, dips in YoY performance in net change in cash and short-term investments indicate issues in management.
Unilever has simultaneous investigations and class-action lawsuits, reflecting poorly on the company. Unilever is undergoing a class-action lawsuit due to a child death caused by the consumption of home cleaning products from its subsidiary company, The Laundress. These products were marketed as non-toxic but contaminated with bacteria during manufacturing. Unilever is also undergoing investigations on greenwashing products by the UK Competition and Markets Authority, on grounds of misleading claims over environmentally-safe manufacturing processes.
Unilever’s ongoing class action lawsuit and investigations both result from false marketing, making it a stock to bet against this year.
Micron Technology (MU)
Micron Technology (NASDAQ:MU), a prominent American computer memory and data storage producer, has witnessed a perplexing surge in its stock, soaring by almost 70% in 2023 despite a notable 40% decline in revenue during the same period. Over the past five years, the stock has nearly tripled without corresponding revenue growth, raising concerns about its sustainability. Challenges loom as the company grapples with a loss of market share, potentially overly optimistic growth expectations and geopolitical tensions impacting its operations in China.
Management’s upbeat forecast for the upcoming year relies on the belief that chip prices will rebound, disregarding the oversupply and demand uncertainties. The semiconductor industry giant faces headwinds, including trade restrictions with China and a potential reduction in subsidies for overseas operations. Micron’s declining market share, particularly in the dynamic random-access memory (DRAM) segment, coupled with industry warnings of soft demand, contributes to the skepticism.
Valuation analysis reveals the stock’s overvaluation, and despite analysts projecting robust revenue growth, the author anticipates stronger headwinds in the second half of the next fiscal year. A discounted cash flow (DCF) model suggests a fair value estimate of $60 per share, signaling a nearly 30% downside.
While Micron has gained market share in NAND Manufacturing, the overall market shrinkage raises concerns. Despite recent price surges in NAND products, sustained demand remains uncertain, we recommend selling this option in contrarian stocks, emphasizing the risks and challenges overshadowing the potential growth factors.
On the date of publication, Michael Que 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.
The researchers contributing to this article did not hold (either directly or indirectly) any positions in the securities mentioned in this article.