2023 was a banner year for tech stocks, with the NASDAQ 100 reaching a new all-time high (and the S&P 500 reached its all-time high on January 3, 2024).
While there’s still potential for another rally in 2024, analysts and market pundits are already preaching caution. The tech industry, they say, might already be trading at inflated numbers compared to previous years. And since many investors, including myself, fared very well in the 2023 tech rally, some of you might be holding on to tech stocks you might want to sell.
In this article, we are putting these three tech stocks on the hot seat. These companies have shown mixed financial results, declining revenue, or widening losses—signs of dark times, and we think investors should either trim or avoid them to reduce risk.
Ultra Clean Holdings (UCTT)
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Ultra Clean Holdings (NASDAQ:UCTT) is a tech company that specializes in ultra-high purity cleaning and analytical services for the semiconductor industry. Its operations are divided into two segments: the products segment for its subsystems design, engineering, and production tools manufacturing for the display capital equipment and semiconductor market, and the dervices segment for its ultra-high purity parts cleaning, surface encapsulation, re-coating, high sensitivity micro contamination analysis for wafer fabrication equipment (WFE) and semiconductor device makers markets.
UCTT’s recent third-quarter financials don’t paint a pretty picture. Total revenue fell by 31.50%, from $635 million to $435 million YoY. The company’s high-margin Service segment dropped by $24.60 million, or 31.26%, significantly impacting its profitability. To add more bad news, income from operations also decreased from $36.3 million to $5.7 million, or 84.30%. Putting it all together, UCTT reported a bottom-line loss of $14.5 million.
This negative quarterly performance may indicate that the company faces challenges that can hinder growth in the near term. That is why we think investors should be wary of UCTT, at least for now, and might want to consider selling it and buying more promising tech stocks instead.
Radware (RDWR)
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Second on our list of tech stocks to sell is Radware (NASDAQ:RDWR) a company that specializes in cyber security and application delivery solutions. Its solutions incorporate different ways to protect its subscribers from cyber-attacks using DDoS protection (Distributed Denial of Service), ADC (Application Delivery Controllers), and WAF (Web application firewall).
These are primarily deployed into enterprises and carrier data centers to ensure the optimal service levels of operation. Its products include APSolute Vision for performance monitoring, LinkProof NG and Fastview for application delivery, AppWall Web Application Firewall, and DefensePro Attack Mitigation Device for network security.
RDWR’s Q3’23 financials pointed to its cloud segment ARR, which saw a notable 25% increase, and revenue increases in the EMEA and APAC regions seem to buoy the company’s results YoY. However, the Americas region’s revenue saw a 24% decline. This resulted in a top-line loss of 13% and a more substantial 131% drop in bottom-line numbers. While the company’s CEO, Roy Zisapel, has underscored its strategic focus on expanding the cloud security business, it is evident that the company is experiencing financial challenges. The uncertainties about the company’s future profitability and growth potential make it one of the tech stocks you should trim down.
IAC Digital (IAC)
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IAC (NASDAQ:IAC) is an Internet company operating under the following segments: Dotdash Meredith which operates its digital and print businesses; Angi Inc. for its leads and ads, roofing & international, and service; search for its list of websites that offer general search and information services under the Ask Media group; emerging & other that including Care.com, Vivian Health, The Daily Beast, Mosaic Group, IAC Films, and Bluecrew.
While IAC narrowed its operating losses by 74% and grew its adjusted EBITDA by 83%, that’s all the good news in this latest financial quarter report. Dotdash Meredith’s Digital revenue is down 4% YoY, and Print revenue is down 16%. Angi Inc.’s revenue reflected a change in its net revenue recognition, which led to a pro forma net decrease of 14%, driven by Domestic business declines. Emerging & Other segment revenue also decreased by 12%. Most notably, net loss also came in 512% higher YoY, mostly attributable to fluctuations in MGM Resorts’s price, of which IAC owns 64.7 million shares.
Even with the increased operating income, the overall revenue decline, segment revenue decline, and uncertainties bring a stern warning to investors. That’s why we believe avoiding IAC or adding it to your “tech stocks to sell” list is best.
On the date of publication, Rick Orford 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.
Rick Orford is a Wall Street Journal best-selling author, investor, influencer, and mentor. His work has appeared in the most authoritative publications, including Good Morning America, Washington Post, Yahoo Finance, MSN, Business Insider, NBC, FOX, CBS, and ABC News.
