Stocks to sell

Beware! 7 Blue-Chip Stocks Waving Massive Red Flags Right Now.

Sometimes, even blue-chip stocks can generate substantial losses. Disney (NYSE:DIS), for example, plummeted as consumers ditched cable television. Top retail stocks took a hit as they lost market share to online competitors. Others, like Netflix (NASDAQ:NFLX) and Tesla (NASDAQ:TSLA) pulled back because valuations became far too rich. Whatever the case may be, it’s important to stay on top of your blue-chip investments, especially if they’re waving massive red flags. In fact, here are seven more examples of top blue-chip stocks to sell.

Blue-Chip Stocks to Sell: Booking Holdings (BKNG)

Source: Denys Prykhodov / Shutterstock.com

There are signs the leisure travel boom is at its end, which is a negative for Booking Holdings (NASDAQ:BKNG), America’s largest online travel agency. For example, Wyndham Hotel (NYSE:WH) recently noted that in late July, growth in the demand for its hotels had dropped in the U.S. last quarter, while its profits had fallen. In addition, as I noted in a previous column, “two discount airlines: Spirit Airlines (NYSE:SAVE) and Frontier recently warned that Q3 revenues were trending below their previous expectations.

Insiders have also been selling stock recently. But that’ll happen when a stock reaches stellar heights, as BKNG has done. CEO Glenn Fogel, for example, sold about $2.4 million worth of stock. Chief Financial Officer David Goulden also sold about $1.8 million worth of stock. Also, unlike many names in the travel space, BKNG stock is not trading at a low valuation. In fact, it trades at 19x forward earnings, which isn’t too far from where the S&P 500 trades.  

Delta Airlines (DAL)

Source: NextNewMedia / Shutterstock.com

Delta Airlines (NYSE:DAL) has apparently been dragged down by the travel slowdown, and higher oil prices. The latter, of course, will increase the firm’s costs and lower its profits.

Given these points, it’s not surprising that the airline recently cut its third-quarter earnings per share guidance to $1.83 to $2.05 from $2.20 to $2.50. In addition, DAL now expects its revenue per available seat mile to fall 2% to 3% year-over-year this quarter. Although the company reiterated its full-year earnings per share guidance of $6 to $7, I believe that this outlook could very well be too optimistic at this point. At a minimum, its EPS is likely to come in towards the low end of the range.

Blue-Chip Stocks to Sell: Comcast (CMCSA)

Source: Shutterstock

At first glance, Comcast’s (NYSE:CMCSA) second-quarter results appear okay. For example, its top line climbed 1.6% year over year. Meanwhile, net income,  advanced 4.8% year over year. Most of those increases were reportedly driven by the reopening of company theme parks.

Unfortunately, Comcast’s other, steadier businesses delivered rather discouraging results. Most worrisome for CMCSA stock was the 0.4% YOY decline in the revenue of its Residential Connectivity & Platforms business and the net loss by that business of 65,000 of its customers last quarter. That unit encompasses the firm’s broadband internet and cable TV offerings.

In addition, competition from Verizon (NYSE:VZ) and other telecom companies is starting to meaningfully erode Comcast’s broadband Internet unit. All while its cable TV business continues to lose customers. Also, the revenue of its media business was little changed year over year. We also have to consider that consumer cord-cutting won’t exactly help the stock moving forward either.

Home Depot (HD)

Source: shutterstock.com/Roman Bodnarchuk

As I pointed out in a previous column, Home Depot (NYSE:HD) is being hurt by a low number of homes being sold due to the current, elevated interest rates.  Indeed, last quarter, HD’s comparable sales sank 2% year over year, while its operating income tumbled a rather discouraging 8.6%. I don’t see much improvement in the foreseeable future, especially with seasonally adjusted housing starts down 11.3% in August, year over year.

While I do expect the Fed to cut interest rates early next year, it will likely take until the middle or end of next year for home starts and home sales to rebound meaningfully. By that time, HD stock is likely to have fallen a great deal.

Blue-Chip Stocks to Sell: Gap (GPS)

Source: Shutterstock

Some may quarrel with my inclusion of Gap (NYSE:GPS) on a list of blue-chip stocks. But the company’s Gap and Old Navy stores are quite ubiquitous in the U.S., making the country a top brick-and-mortar realtor. As a result, I think that GPS does qualify as a blue-chip stock. Last quarter, the company’s comparable sales tumbled 6% year over year. Online sales sank 11%. In addition, GPS reported that  Old Navy, which used to be a pillar of strength for the firm, suffered “a comparable sales drop of 6%.” Gap also expects its revenue to dive at least 10% during the current quarter.

Clearly, the company’s offerings are just not resonating with consumers, and/or it’s being eaten alive by its competition. GPS has to figure out how to turn its business around. And until it does so, GPS is clearly one of the blue-chip stocks to sell now.

Nordstrom (JWN)

Source: Jonathan Weiss / Shutterstock.com

Like Gap, Nordstrom (NYSE:JWN) is one of America’s top apparel retailers. Unfortunately for JWN and its peers, analysts, on average, expect U.S. apparel sales to climb only 1% during the upcoming holiday season.

Nordstrom’s sales tumbled 8% last quarter versus the same period a year earlier. Excluding the closure of its Canadian operations and the timing of a key sale, its revenue would have declined “only” 4% year-over-year, the firm reported. Still, the retailer expects its revenue to sink 4% to 6% year-over-year in Q3, showing that its performance is not likely to improve anytime soon. Also noteworthy is that its earnings before interest and taxes (EBIT) dropped to $192 million from %$202 million in Q2 of 2022.

As with Gap, Nordstrom appears to be losing a significant amount of market share and has to find a way to turn itself around.

Whirlpool (WHR)

Source: Grzegorz Czapski / Shutterstock.com

Clearly, appliance maker Whirlpool (NYSE:WHR) is, like Home Depot, being badly hurt by the low number of home sales. Whirlpool is, of course, being hurt by the trend because people who move into new homes often buy new appliances for them, while builders add new appliances to the houses that they’ve created.

Whirlpool’s top line sank 6% last quarter versus the same period a year earlier, while its operations burned $370 million of cash, nearly the $180 million that its operations used during the same period a year earlier.

Until home sales show signs of starting to recover meaningfully, WHR stock is unlikely to advance much and could very well drop a great deal. Unfortunately, as I pointed out in the section on HD, I don’t expect home sales to start recovering until the middle of 2024 at the earliest.

On the date of publication, Larry Ramer did not hold (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.

Larry Ramer has conducted research and written articles on U.S. stocks for 15 years. He has been employed by The Fly and Israel’s largest business newspaper, Globes. Larry began writing columns for InvestorPlace in 2015. Among his highly successful, contrarian picks have been PLUG, XOM and solar stocks. You can reach him on Stocktwits at @larryramer.

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