The market is giving investors mixed signals. But this is a time when what’s happening on Main Street differs from what’s happening on Wall Street. There are crystal clear signs that the consumer is losing steam. This makes it time to look at consumer stocks to sell.
Companies are reporting that consumers are pulling back on discretionary purchases. Credit card balances and delinquencies are up, but cash and savings are down. And soon, consumers will have to start repaying student loans. All of these data points will continue to put pressure on the future revenue and earnings of many consumer companies. One way to find consumer stocks to sell is to look at analyst sentiment. It’s uncommon for analysts to issue a sell or strong sell rating. Sometimes, a hold or reduce is the best hint an investor can get. That’s why, to find these stocks, I used a stock screener to find consumer stocks that had a consensus hold, sell or strong sell rating in the last 90 days.
Allow me one final thought before we look at these consumer stocks to sell. Whenever I write about stocks to sell it’s important to note that it’s not necessarily time to say goodbye to a stock forever. But sometimes, it’s a better use of your capital to part ways, for now.
AMC Entertainment (AMC)
I noted in the introduction that it’s uncommon for analysts to issue a strong sell rating. That’s not the case with AMC Entertainment (NYSE:AMC). The stock is not widely covered by analysts. However, of those eight, four give it a Strong Sell rating.
At this point, the case against the stock goes beyond brick-and-mortar versus streaming. If there’s a blockbuster movie, people will go to the theater. But there just aren’t a lot that qualify as blockbusters. And the various strikes by groups in Hollywood may dry up the pipeline even further.
This stock is fully in the hands of traders, many of whom believe a short squeeze like they saw in 2021 is possible. I side with fellow InvestorPlace writer Ian Bezek in being doubtful about that. That leaves the fundamentals, and there’s very little there to get excited about. The company did post a profit in its most recent quarter. But given the actions it took to dilute shareholders, it’s fair to ask at what cost? I’d prefer to ask that question from the sidelines.
Yeti (NYSE:YETI) Is a small company that made a big name for itself during the pandemic. The company is best known for its signature coolers as the flagship in its line of premium outdoor living products.
In 2021, Yeti’s revenue and earnings grew strongly on a year-over-year (YOY) basis and so did the YETI stock price. In November 2021, YETI stock traded at over $100 per share. Today, the stock trades for less than half of that. The reason for that is its growth is normalizing. Earnings per share growth has been falling YOY for the last six quarters. And in its most recent quarter, revenue did the same. Short interest is also up by 11% in the last month. The forward P/E of 23x is in line with the S&P 500, but that may be a bearish sign if the broader market is overvalued.
Analyst sentiment for YETI stock is about 50/50 bullish to bearish. With a consensus price target showing a 5% gain, there seems to be more downside risk than upside benefit. This may be a case of liking the company more than the stock for now.
Estee Lauder (EL)
At first glance, I can make a case for Estee Lauder (NYSE:EL) being an undervalued stock. The 54% sell-off since the end of 2021 looks overdone since revenue is still comparable with the level it was at in 2021. Earnings are a different story. In the last 18 months, the company has shown investors that its business is not recession-proof.
But that alone doesn’t explain such a sustained correction. For that, you have to look at Asia-Pacific sales, which continue to be weak. The company relies on the region for approximately a quarter of its revenue. And while revenue and earnings got a boost from the reopening of China’s economy, the same can’t be said for the rest of the region.
It’s not hard to think that brighter days could be down the road for the maker of luxury skin care products. Analyst sentiment is slightly more bullish than bearish. But that doesn’t make EL stock a buy.
The Container Store (TCS)
The Container Store (NYSE:TCS) was an obvious winner in 2020. As consumers stayed home, bought homes and moved from one home to another, the company’s line of products were in high demand. But the company has gone from slowing growth to not growing, and it’s weighing on TCS stock.
In its most recent quarter, revenue was down more than 20% YOY, and earnings were down even more. In fact, the company posted negative earnings per share of 21 cents.
Executives of the company, including CEO Sathish Malholtra, are buying shares of the company’s stock. That may put a floor on the stock now that it’s trading near its 52-week low. But analysts are bearish on the stock. Still, traders may find this penny stock too compelling to pass up. But if you have a longer-term focus, you’ll want to wait for the company’s fundamentals to improve before buying back in.
Beyond Meat (BYND)
For the first two years that Beyond Meat (NASDAQ:BYND) traded publicly, the stock was excelling beyond investors’ imaginations. You can also say it was excelling because of investors’ imaginations. However, since July 2021, BYND stock has been on a one-way slide. And for long-suffering investors, it should still be considered one of the consumer stocks to sell.
The company is on a mission to make plant-based food mainstream. And the company has a devoted base of early adopters. But growing beyond a passionate niche is proving to be more difficult. And that task is being made more difficult by inflation that continues to keep food prices high.
The company was hopeful that rising beef prices would make the plant-based premium more digestible. But so far, consumers are still buying beef. And even when they’re not, consumers are turning towards less pricey protein such as chicken or pork, not plant-based alternatives.
At a time when investors are looking for value, Beyond Meat remains years away from profitability. Traders may still hold out hope for a short squeeze, but right now, it’s just as likely that BYND stock is destined for penny stock territory.
Blue Apron (APRN)
Blue Apron (NYSE:APRN) is a case where two things can be true. Unfortunately for Blue Apron, both of those things make this a candidate as one of the consumer stocks to sell.
First, APRN stock is a favorite of meme stock traders. APRN stock is up over 31% in the month ending on September 7, 2023. But it’s down 15% in the last week of that month. And despite being down 5.7% in the last month, short interest in the stock still sits at over 20% as of this writing. That’s good for investors hoping for a short squeeze.
The other reality facing investors is that YOY revenue is declining. The maker of meal kits also continues to lose money, with no likelihood of that changing anytime soon. The problem with the company’s business model is inflation. If consumers decide to cut back, home meal kits would be a likely choice. And if the company cuts prices to keep members, it creates a downward spiral.
National Beverage (FIZZ)
National Beverage (NASDAQ:FIZZ) is last on this list of consumer stocks to sell. There’s nothing about the company’s financials that jump out in a negative way. But there’s also not much there to get you particularly excited either. At least not enough to justify National Beverage’s current valuation of 31x earnings.
The company has a compelling portfolio of brands, including La Croix sparkling water. And investors have seen consumer staples companies be able to justify a high valuation by passing on higher producer prices.
The question is how long that can last. Revenue and earnings are just barely keeping pace with inflation. And this isn’t exactly a sector where companies have a strong moat. What it comes down to for me is that a stock like PepsiCo (NASDAQ:PEP) may have a high valuation but offers shareholders a dividend, whereas National Beverage does not. Therefore, investors have other options for their capital and can pass on FIZZ stock.
On the date of publication, Chris Markoch 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.