Stocks to Avoid in 2024 Investment Outlook: 3 Companies You May Want to Avoid in 2024

By: Alex Freidmen

Wall Street concluded 2023 with a bullish trend, scaling new heights for the final nine trading weeks. Notwithstanding the broader market upswing, certain stocks failed to ride the wave. Last week, three picks for shorting — Alibaba Group (NYSE: BABA), Steelcase (NYSE: SCS), and JD.com (NASDAQ: JD) — recorded respective gains of 3%, losses of 3%, and a rise of 5%. These combined statistics yielded an average gain of 1.7% for the week.

The S&P 500 edged 0.3% higher, hence not fully aligning with my projections. Nevertheless, out of the past 114 weeks, I have managed to make the correct call 70 times, translating to a success rate of 61%.

However, this marks the opportune moment to conclude this weekly column. While expressing my inner pessimism and continuing to identify overvalued stocks have been integral to my strategy, making short-term market predictions has never formed a part of my long-term investment approach. Thus, I propose a shift in focus from the weekly to the yearly horizon. Let’s direct our attention to stocks that may falter through the course of the new year. As per my analysis, I foresee Apple (NASDAQ: AAPL), Cal-Maine Foods (NASDAQ: CALM), and Tesla Motors (NASDAQ: TSLA) underperforming the market in 2024. Let’s delve into the specific concerns pertaining to these diverse investments.

Risks of Investing in Apple in 2024

Historical data suggests that wagering against Apple in 2024 may not be unwarranted. Reviewing the records back to 2012, Apple experienced a single fiscal year with double-digit revenue growth, followed by two successive years of lackluster performance characterized by negative or single-digit top-line gains.

  • Fiscal 2012 revenue growth: 45%
  • 2013: 9%
  • 2014: 7%
  • 2015: 28%
  • 2016: (8%)
  • 2017: 6%
  • 2018: 16%
  • 2029: (2%)
  • 2020: 6%
  • 2021: 33%
  • 2022: 8%
  • 2023: (3%)

While Apple introduces a new flagship iPhone model annually, it appears that a significant update occurs every three years. Is this triennial boost now a thing of the past? Perhaps not. Analysts project Apple’s revenue to rise by less than 4% in the current fiscal year, with expectations of a mere 6% upturn in fiscal 2025.

A friend sharing her phone screen by a window.

Image source: Getty Images.

I am a staunch advocate of the Apple ecosystem of consumer tech products, with a modest stake in the company. However, I harbor reservations about whether the consumer tech behemoth can maintain its position as the nation’s most valuable company, with a market cap of $3 trillion, amid four unimpressive years of growth at Apple.

Notwithstanding the logical case for Apple as an all-weather stock, outperforming the market during equities’ downturns due to its flight-to-quality characteristic and maintaining a winning streak amid a thriving economy where consumers are willing to pay a premium for its products, the stock’s surge of 49% in 2023 despite a slight setback in revenue and net income is hard to justify when considering the acquisition at over 30 times trailing earnings for a sluggishly evolving Apple.

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The Case Against Cal-Maine Foods in 2024

While I generally do not proffer short-term predictions, I foresee lingering challenges for Cal-Maine Foods throughout 2024. The first trading week of 2024 will witness limited earnings reports, with Cal-Maine being a conspicuous entry. Envisage potential disappointment for the company’s shareholders. A year ago, the egg producer was riding high on a supply shortage, which propelled prices, margins, and profitability. However, the current scenario of paying less than $10 for a dozen eggs heralds distress for Cal-Maine investors.

Cal-Maine is slated to disclose financial results for its fiscal second quarter later this week. Analysts anticipate a significant decline of 34% in year-over-year revenue, accompanied by an alarming 83% downturn in earnings per share. Furthermore, the seemingly attractive trailing yield should not deceive investors – Cal-Maine dispenses a variable dividend, which is anticipated to correspondingly recede in line with its diminishing profitability. In summary, this egg producer might not live up to the high expectations set for it.

Predictions for Tesla in 2024

It might come as a surprise that Apple isn’t the most contentious bearish prospect on this list. As a Tesla owner for three years, I harbor a deep admiration for the company’s cars. However, confidence in the stock’s 2024 performance wavers, given its more than doubling in value in 2023 despite several notable setbacks.

Revenue growth witnessed a sharp deceleration in 2023. Profitability has waned as the necessity to offer price reductions to expedite sales has compressed margins. Elon Musk’s assorted preoccupations constitute a cause for concern, with even Musk acknowledging that he can be polarizing. While Tesla owners largely express satisfaction, the outlook for 2024 seems uncertain, particularly in light of non-Tesla vehicles beginning to occupy Supercharger bays, lengthening wait times. Furthermore, the depreciation in resale values over the past year will only add to the challenges.

In a capricious stock market, investors seeking secure investments are unlikely to find them in Apple, Cal-Maine Foods, and Tesla Motors.

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Rick Munarriz, with positions in Alibaba Group and Apple, is a contributing writer. The Motley Fool holds and recommends positions in Apple, Cal-Maine Foods, JD.com, and Tesla. The Motley Fool also recommends Alibaba Group. The Motley Fool has a disclosure policy.