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The tech sector has been carrying the S&P 500 for most of the year, making investors very optimistic about its future. However, the scramble to buy into the area brings to mind the aphorism, “A rising tide lifts all boats.” That is to say, the increased optimism tends to overlook the glaring issues with some tech stocks.
With the recent popularity of AI and cloud computing, pretty much any company that mentions delving into the technology will most likely catch investors’ attention.
In this article, we’ll examine the fine print to see what separates these three potential tech stocks to sell from the companies that are here to make money.
Aspen Technology (AZPN)
Aspen Technology (NASDAQ:AZPN) is an industrial software firm specializing in complex industrial environments requiring critical asset design, maintenance lifecycles and operations optimizations. The company’s solutions combine simulation, modeling and industrial operations expertise to help improve the sustainability and profitability of production assets. Aspen Technology is considered the leader in industrial software for performance management.
Aspen Tech’s latest financial report for Q1 FY2024 showed mixed results. While its annual contract value increased by 10.90%, its revenue in various areas dipped year-over-year (YoY). That includes revenues in maintenance, licenses & solutions and others. AZPN also reported increased losses from operations and a significant decrease in non-GAAP net income YoY.
The company also failed to meet analyst expectations as its earnings missed consensus by 19.33%. Those negative results came simultaneously as a leadership change, with current SVP Christopher Stagno as the interim chief financial officer. The company’s weak financial results and change in leadership fail to give a compelling reason to be optimistic about AZPN in the short term. In our view, it is one of the tech stocks to sell right now.
LivePerson (NASDAQ:LPSN) is a tech company specializing in conversational artificial intelligence (AI). The company’s operations are divided into two main segments: consumer, which facilitates transactions between experts and customers looking for information through online messaging and mobile at a cost, and business, which bridges online businesses and their customers in an integrated suite of business messaging technology. Its products include LivePerson’s Conversational AI, e-Bot7, Tenfold, The Conversational Cloud and VoiceBase.
The company’s latest report showed some glaring financial issues. While the company signed 50 deals, including 4 seven-figure ones, its net loss increased from $43.2 million to $53.3 million YoY despite an increase in its adjusted EBITDA. The company also failed to meet earnings expectations by 14.29%. Due to the poor quarterly outing, LivePerson significantly reduced its cash balance and narrowed revenue guidance expectations. The continuous decrease in revenue, widening net loss and sharp reduction of its cash reserves suggest one critical thing: It might be time to sell the stock while you still can.
Global positioning systems have come a long way since they were first developed. However, the increasingly urbanized, multi-level environments around the world present a difficult challenge to existing GPS platforms. NextNav (NASDAQ:NN) aims to solve such issues by offering improved two-dimensional geolocation and three-dimensional “floor level” views. According to the company, the increased sensitivity of its Pinnacle and TerraPoiNT solutions can help public safety, telecom and critical infrastructures improve geolocation and decrease response and repair times. NN caters to both the developer and consumer levels.
That’s all well and good. However, looking closely at NN’s financials paints a concerning picture. Operating loss numbers show the company is still struggling, as it reported its operating loss was $43.6 million. Its 3-month operating loss continued at a similar pace at $14.6 million. Its financial report also showed that the 9-month net loss has doubled and reached $55.3 million YoY. Additionally, its earnings estimate failed to meet expectations by a sobering 50%. Despite some operational successes and successful government contracts, NN’s financial performance is concerning, and we think the company is one of the tech stocks to sell.
As of the date of publication, Rick Orford did not hold any positions (either directly or indirectly) 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.