In the colorful stock market landscape, doomed tech stocks are an ominous yet unavoidable presence. Tech stocks have effectively managed to swim against the current, showcasing an uptick, despite forewarnings of a couple of interest rate hikes in 2023. Investors, eager for signs of recovery, toasted the revival of the tech bull market.
However, the shadows of a tumultuous 2022 continue to loom over the tech industry. Despite its undeniable allure, the sector saw a staggering $4.6 trillion shrink in market capitalization over the last year. Although the climate has somewhat improved this year, recession indicators and a reliable barometer of consecutive unemployment rates indicate potential economic strife.
Therefore, it’s imperative to consider avoiding tech stocks that continue to dance on the edge of instability. Investors need to sidestep the ones destined for disaster, keeping a watchful eye over the market.
Coinbase (NASDAQ:COIN) has been one of the top momentum stocks since the start of the year but now grapples with storm clouds on its horizon. The cryptocurrency exchange, reveling in a triple-digit gain over the last six months, got caught by a lawsuit from the U.S. Securities and Exchange Commission (SEC). It has been accused of operating as an unregistered securities dealer and broker, and the company faces a significant challenge.
Coinbase, unflinching in its response, denies the allegations. CEO Brian Armstrong has pledged to contest the Wall Street regulator in court. However, this judicial shadow introduces a chilling uncertainty over both the company and its COIN stock. Further complicating the situation, another lawsuit, backed by 11 states, compels Coinbase to justify its operations and defend its right to continue trading cryptocurrencies. With the company’s primary revenue stream under threat, these legal hurdles risk magnifying its massive losses.
Even as Snap’s (NYSE:SNAP) daily active users flourish, the platform appears stuck in a monetization quandary. Its recent quarterly report unveiled a worrying 7% drop in sales and a 4.5% cost of revenue. With a profitability record that’s been stuck in the mud over the past few years, its window of opportunity for monetizing its users seems to be creaking shut.
Though Meta Platforms (NASDAQ:META) cornerstone service, Facebook, continues to witness lukewarm user growth, its diversified suite, including Instagram, Messenger, and Facebook Marketplace, makes it a dynamic user ecosystem that is hard to escape.
However, Snap doesn’t boast such a protective moat, facing a constant threat of its diversified rivals’ poaching users. The wise investor might now consider disembarking before the ship navigates into stormier waters.
In a bold bid to hold its own against semiconductor giants, Intel (NASDAQ:INTC) embarked on a remarkably risky course, burning through cash at a distressing rate. To back its audacious strategy, the tech giant unveiled a colossal $33 billion investment to erect two new chip fabrication plants in Germany.
Yet, this massive outlay arrives on the back of Intel’s record-breaking net loss in May, leaving investors in a fix. Not long ago, the tech giant had reduced its annual dividend from $1.46 per share to a humble 50 cents per share, following its negative cash flow in 2022.
Intel’s journey to regain lost ground is turning out to be a turbulent voyage for shareholders. The company’s shares continue languishing in the red, with its top and bottom-line losses creeping up spectacularly. In addition, its free cash flow margins have nosedived over 18% during the same period, darkening the cloud over Intel’s long-term financial health.
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