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Tax-loss harvesting is a process where investors sell their securities at a loss in an effort to offset capital gains from the sale of other profitable investments. It is a strategy where you limit short-term capital gains, which are taxed at a higher rate compared to long-term capital gains - allowing you to preserve overall portfolio value and reduce taxes.
Investors should consider selling beaten-down, fundamentally weak companies that are unable to outpace the broader markets even if market sentiment improves. Here are three such struggling Nasdaq stocks investors might want to unload from their portfolios before the end of 2023.
Nikola
Valued at $818 million by market cap, shares of electric vehicle manufacturer Nikola (NKLA) are down 98% from all-time highs. The company is wrestling with several issues and recently appointed its fourth CEO since 2019 - which is worrisome, to say the least.
While Nikola’s former CEO Trevor Milton was convicted on three counts of fraud in late 2020, the entity is also struggling with structural issues including heavy losses, vehicle recalls, and a weak balance sheet.
Nikola ended Q2 with just $227 million in cash, which suggests it will have to raise equity capital soon to offset its cash burn rate, forecast at $600 million for 2023. While still unprofitable, Nikola just raised $325 million via convertible notes, effectively doubling its share count to boost its liquidity position. It also has over $600 million in total liabilities, making NKLA a high-risk investment at the current valuation.
All six analysts covering Nikola stock recommend “hold.” The average target price is $2.40, which is 109% above current levels.
Beyond Meat
A relative giant in the plant-based meat industry, Beyond Meat (BYND) demonstrated stellar growth soon after it went public in 2019. It reported a few quarters of triple-digit revenue growth on the back of new product launches and expansion of retail sales.
However, due to rising competition and slowing demand, sales growth decelerated significantly in the last few quarters. In Q2 2023, Beyond Meat sales were down 31% year over year. Its gross margins improved to 2.2% in Q2 from -4.2% in the year-ago period. Its focus on cost-cutting also enabled Beyond Meat to narrow losses to $53.5 million from $97 million in the prior-year period.
The company expects sales to decline between 9% and 14% year over year in 2023. Beyond Meat had earlier claimed it would report a positive operating cash flow in the second half of 2023, which now seems unlikely. With $226 million in cash and $1.1 billion in debt, BYND will likely have to raise additional funds to support its unprofitable business model.
Out of the 12 analysts covering Beyond Meat stock, four recommend “hold,” one recommends “moderate sell,” and seven recommend “strong sell." The average target price for BYND is $9, which is 30% above current levels.
SunPower
The final stock on my list is SunPower (SPWR), which is down 92% from all-time highs. In Q3 2023, analysts forecast SunPower to report revenue of $455 million and breakeven earnings. However, the company reported sales of just $432 million and a loss of $0.12 per share in the September quarter.
Sales were down 9% year over year due to lower-than-expected demand and delayed revenue recognition, as cycle times have increased. Further, SunPower said it added 18,800 new customers in Q3, and grew bookings of solar projects by 59% compared to the June quarter.
While SunPower is reducing its cost base, it forecasts an EBITDA (earnings before interest, tax, depreciation, and amortization) loss between $25 million and $35 million in 2023. It was earlier estimated to report a positive EBITDA of $65 million this year.
Out of the 23 analysts covering SunPower stock, two recommend “strong buy,” one recommends “moderate buy,” 14 recommend “hold,” two recommend “moderate sell,” and four recommend “strong sell.” The average target price for SPWR is $8.43, which is 109% above the current price.
