The nature of the stock market is that at any given time, there will always be stocks to avoid buying and others to load up on ASAP.
A good percentage of stocks follow a cyclical price pattern, which means they fall in sync with the wider economy’s performance.
However, the wider economy doesn’t have to be faltering for all stocks to perform poorly. Even companies with popular products or whose products are a hit with users can have their share price suffer.
This could be due to a decline in demand, a shift in how customers prefer to acquire certain products, competition, or shaky fundamentals like mounting debt. Any of these factors could be responsible for driving down a stock’s value.
The companies below are examples of such stocks. They aren’t exactly living up to their best potential — and you might be wise to consider them the stocks to avoid for the time being.
EPAM Systems (EPAM)
EPAM Systems (NYSE:EPAM) stock crashed 27% on May 9 after it declared lower-than-expected sales and revised downwards the revenue guidance for this year.
The Newton, Pennsylvania-based IT services firm announced it now expects revenues to fall between $4.575 billion and $4.675 billion this year.
And though earnings topped analysts’ estimates, EPAM’s other metrics, such as year-over-year (YOY) performance and GAAP and non-GAAP income, spooked investors and earned it the worst performer on the S&P 500. The company blamed the downturn on a “challenging demand environment.”
EPAM shares opened the year trading at about $290 but have now dipped to $175 — a year-to-date (YTD) decline of 44% and a drop of over 75% from its all-time high in late 2021.
Despite the fact that EPAM stock has an overweight consensus rating on MarketWatch, it’s telling that the 13 neutral or bearish analyst ratings outweigh the positive ratings of buy and overweight.
In short, all signs point to EPAM being one of the stocks to avoid at this time.
Paycom Software (PAYC)
Paycom Software (NYSE:PAYC) has shed 22% since its earnings release on May 1 and 29% YTD. The company’s financials this quarter look relatively tidy, but that’s until you compare it with the same period in the last two years.
For instance, Q1 revenues are up 11% from the same period the year prior, while 2023’s and 2022’s revenues for the same period came to 28% and 30%, respectively. That performance illustrates the company’s YOY revenues, which have been on a downward trajectory.
Ironically, Paycom’s woes stem from its star product, Beti. During last year’s Q4 report, CFO Craig Boelte revealed that many of its clients were gravitating almost exclusively towards the software, which had “eliminated certain billable items, which is cannibalizing a portion of our services and unscheduled revenues.”
On MarketWatch, Paycom has an average analyst rating of hold. For investors seeking dramatic gains in the short term, Paycom might be one stock to avoid for now.
Roblox Corp (RBLX)
Shares of the gaming company fell 21% in intraday trading after its Q1 report on May 9 fell short of expectations. They then quickly rebounded back to the average levels in the weeks prior.
Still, shares are down over 20% since the turn of the year. This demonstrates that while investors are betting on Roblox Corp (NYSE:RBLX), they’re being cautious.
Several investment firms are also involved, including BTIG Research, which revised RBLX’s target price downwards from $54 to $46, and Wedbush, which dropped its target price from $56 to $46 for the stock. Meanwhile, Goldman Sachs slashed its rating from $48 to $38 and gave it a neutral rating.
Compounding Roblox’s problems is its struggle to retain or increase player engagement. The company now expects to make $4 billion to $4.1 billion in bookings, up from the original expectation of $4.14 billion to $4.28 billion.
Roblox’s current challenges will not cripple it by any stretch of the concept. But for investors for whom a few things look iffy, it’s okay to conclude that Roblox is one of the stocks to avoid this quarter.
On the date of publication, Hope Mutie did not have (either directly or indirectly) any positions in the stocks mentioned in this article. The opinions expressed in this article are those of the writer, subject to InvestorPlace.com’s Publishing Guidelines.