October has just begun, but this month is already shaping up to be scary. The S&P 500 closed last week roughly where the month started, but geopolitical turmoil, economic unease and more are combining to spook markets and investors.
Macroeconomic and market-wise risk aside, some companies are susceptible to today’s news and landscape. Those, of course, are among the stocks to sell in October. Some may seem surprising, while others are no-brainers. If you’re scared of the market this month, you’re in good company and easily forgiven for holding cash until things blow over. If you’re holding any of these seven stocks, they’re ones to sell before things get too spooky this month.
Stock to Sell: Airbnb (ABNB)
Airbnb (NASDAQ:ABNB) has been making news in recent months but for all the wrong reasons. Beyond full-blown Airbnb bans in New York and restrictions elsewhere, Airbnb’s once-booming market is rapidly dwindling. At the same time, some — like author Robert Kiyosaki — point to the company itself as driving an imminent housing crash. He recently posted on his personal X account (formally Twitter) that Airbnb will “lead [a] real estate market crash.”
Despite the stock’s recent S&P 500 inclusion, the wave of bad news combined with a tight real estate market and limited vacation funds makes this one stock to sell in October. Company CEO Brian Chesky is rapidly spinning up the Airbnb team to right the ship, but it might be too late for a short-term reversal. Shares are already down 14% since last month, and his move to begin offering long-term, multi-month rentals faces headwinds from concerns that customers will quickly become difficult-to-evict squatters.
Assuming Airbnb can navigate emerging regulatory demands, there’s still hope for the stock long-term. But too many factors are converging to make this a strong stock for this season.
Cisco Systems (CSCO)
Cisco Systems (NASDAQ:CSCO) made waves when it announced its imminent $28 billion buyout of cybersecurity firm Splunk (NASDAQ:SPLK). Still, the move might not save the ailing digital communications company. While the move might prove a short-term boon, it may just be a Band-Aid in the long term.
Analysts at Morningstar point to Splunk’s lagging position in the cloud computing sector, as its hefty on-premises operational model makes it costly — on top of the billions Cisco is spending to acquire it. Cisco’s CEO Chuck Robbins is hinging his hopes on Splunk’s $4 billion in annual recurring revenue. However, in a world where cybersecurity customers are cutting spending, they may begin leveraging leaner (and cheaper) competitors.
Splunk’s total cost of revenue is $816 million in 2023, generating a negative net margin. That’s a high business cost, and with more than $3.3 billion in debt, Cisco has an uphill battle to profitability. That’s before considering the company’s acquisition costs and $6.7 billion debt load. The move may pay off in the long term, but in today’s environment of rising debt costs and client cost-cutting, Cisco has a long road to walk before it’s in the clear.
Stock to Sell: Tesla (TSLA)
I’m as bullish on Tesla (NASDAQ:TSLA) as anyone, but if you aren’t in it for the long haul, this is one stock to sell in October. The company made moves to ensure it had a better chance to hit its lofty electric vehicle (EV) delivery goals recently. Reacting to reduced consumer demand amid economic belt-tightening, Elon Musk and his team’s reaction is one you don’t want to see: They’re cutting prices across the board.
The company’s margins have always beaten the competition but already fell to four-year lows in the last quarter. Further price cuts and rising material costs will further cut into profitability, making the next few reporting periods perilous for Tesla stock.
At the same time, Tesla faces risk from ongoing federal attention on Musk himself as prosecutors seek to “determine whether Tesla properly disclosed perks that Musk may have received from the company,” among other questionable investigatory initiatives. Tesla is a risky play in today’s climate and for as long as Musk is in the hot seat. Both make Tesla a stock to sell in October based on outsized risk alone.
Rivian Automotive (RIVN)
If Tesla is a long-term winner facing short-term trouble, Rivian Automotive (NASDAQ:RIVN) is a lose/lose on both fronts. The company announced last week that its financial standing was shaky enough to warrant a convertible bond sale, which is a red flag in any market. Convertible debt increases interest costs for the company, like any bond. But these are a double-whammy as they dilute existing shareholders if the bondholders exercise the convertible option. While the company hasn’t announced the coupon tied to the $1.5 billion debt offering, higher interest rates force firms to increase their cost of debt to attract the capital inflow they need to maintain operations.
In a recent note, Battle Road Research analyst Ben Rose summed up the stock’s predicament well. Reinforcing his reasoning to sell the stock, he said that “Rivian continues to face challenges with engineering and production, has a questionable capacity and utilization strategy, operates in a sector that is competitive and challenging in the near-term, and its cost-cutting efforts are a bigger obstacle than we had known.”
Stock to Sell: SmileDirectClub (SDCCQ)
SmileDirectClub (OTCMKTS:SDCCQ) fell from grace hard last week, as it filed for Chapter 11 bankruptcy and got delisted from the Nasdaq stock exchange. Still, this loser stock hangs onto its pink sheet position and maintains a $15.5 million market cap. If you’re considering this stock as a potential penny stock rebound play — don’t. SmileDirectClub is the scariest stock on this list and one to sell stat.
The company’s debt load is a whopping $900 million today. Bankruptcy means the company must sell assets as quickly as possible to pay debtors what they can. In these circumstances, shareholders rarely see a dime after creditors get what’s owed. Although the company claims imminent restructuring and emergency cash infusions will save the former dental dynamo, reality paints a different picture. The company’s safety concerns and freefall stock price, among pure financial mismanagement, make SmileDirectClub a stock to sell if you still hold it. Don’t consider investing in this losing penny stock if you aren’t a shareholder.
HP (HPQ)
Investors who follow Warren Buffett should take his lead and sell HP (NYSE:HPQ) stock as quickly as possible. The Oracle of Omaha has been rapidly divesting himself of shares. Notably, he’s selling them at a loss as he rapidly offloads his position. He’s been quiet about the justification, but he’s sold more than $80 million worth of stock in just a few weeks. Buffett and his team bought the stock in 2022 at around $35 per share. Today’s per-share price is about $26, meaning they’re sold at a loss.
Warren Buffett is famously tech-averse, making the initial investment in HP curious. It’s also likely fueling his interest in rapidly selling off the stock. Although HP’s share price has been in freefall recently, its financial position is surprisingly strong. Earnings per share met or beat guidance over the past three quarters, even amid tightened economic conditions. Still, if Warren Buffett is spooked by what’s happening with HP, retail investors should heed his warning and sell the stock.
Stock to Sell: GameStop (GME)
Is anyone still holding GameStop (NYSE:GME) stock? If you are, this is another stock to sell — quickly. Billionaire and activity investor Ryan Cohen, who arguably sparked meme stock mania, stepped up as CEO in late September. He came in hard, pushing for “extreme frugality” at the firm. While cost-cutting is an admirable move and likely necessary today, emphasis on frugality first and operational advancements second isn’t reassuring.
GameStop’s struggles are even more evident when considering that the firm has been cutting costs as quickly as possible. Layoffs and employee walkouts already cut labor costs substantially. At the same time, platform pivots to online-only game sales put GameStop’s limited revenue opportunities at risk. Ultimately, big brick-and-mortar gaming is dead in the water, with existing demand from smaller, nimbler and local competitors. All the cost-cutting in the world can’t save GameStop, and investors still holding out for a short squeeze should reconsider the stock’s prospects.
On the date of publication, Jeremy Flint did not hold (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.