Investors who buy and hold reliable companies can be rewarded immensely for staying strong during volatility. Even the best stocks endure corrections and points when many doubt long-term prospects.
However, some stocks have attracted rightful skepticism and look like they can hurt long-term investors. Stocks don’t always recover and reclaim their all-time highs. These corporations look concerning and don’t warrant investments at this time.
Nike (NKE)
Nike (NYSE:NKE) is losing ground to its competitors as it struggles with innovation. CEO John Donahue blamed remote work for the lack of innovation, which seems like a weak attempt to deflect leadership’s flaws. Many corporations have remote workers and continue to innovate.
Q3 FY24 revenue barely increased and was only up by 0.3% year-over-year. Net income dropped by 5.5% year-over-year. It’s easy to dismiss one bad quarter, but this has happened for multiple quarters.
Long-term gains also haven’t been much to brag about. The stock is down by 15% year-to-date, has fallen by 26% over the past year, and is only up by 8% over the past five years. The stock offers a 1.63% yield, which increases the total returns, but you could have done better with a 5-year certificate of deposit.
The company also hasn’t won good press for its recent products. The MLB uniforms have been a complete disaster and have created an uproar among MLB players. The MLBPA anticipates changes by 2025 at the latest. It’s not a good look for a company that seems attached to sports deals rather than creating innovative product lines.
Tesla (TSLA)
Tesla (NASDAQ:TSLA) has a 43 P/E ratio, which is too high for a company that generates 82% of its revenue from automobile sales. Automobile sales dropped by 13% year-over-year in Q1 2024, while overall revenue declined by 9% year-over-year. Other segments aren’t doing enough to mitigate declining EV sales.
The automaker has been slashing its prices to boost demand, hurting profit margins. Tesla’s profit margins now resemble many car companies. The 5.3% net profit margin reported in Q1 2024 highlights this point.
It’s been a miserable ride for shareholders in recent months. The stock is down by 32% year-to-date with viable concerns. Price cuts and rising competition from Chinese EV manufacturers don’t paint a good picture for Tesla stock. On top of that, GAAP net income nosedived by 55% year-over-year. Tesla’s valuation does not offer any margin of safety, and it has a lot more room to fall before it trades in line with other automobile stocks.
Disney (DIS)
Disney (NYSE:DIS) hasn’t been doing much to win over new fans. The brand hasn’t felt the same since Avengers: End Game, as the company has diverged from good storytelling. Rather than create new iconic stories, the company continues to acquire popular titles and run flimsy spinoffs for its previous successes.
People are developing apathy for the brand. Disney guests are mentioning that visiting the parks feels like a chore. These are expensive trips that come with plenty of stress and careful coordination. Despite these complaints, the rising cost of living, and the logistics involved with planning a trip, Disney Experiences was the main growth driver. This segment grew by 10% year-over-year in Q2 FY24.
However, the entertainment segment declined by 5% year-over-year, while the sports segment only grew by 2% year-over-year. Investors also got the jitters after the company announced its TV business was shrinking.
Disney uses its movie releases to attract people to its theme parks. However, a series of misses and bad remakes of iconic films leave a bad taste in more people’s mouths. It’s also been a bumpy ride for investors, as the stock is down by 22% over the past five years.
On the date of publication, Marc Guberti 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.