3 Stocks to Sell Before They Get Hit by the September Slump

Stocks to sell

The stock market has been on a roller coaster ride in 2023, with the S&P 500 experiencing several sharp swings in both directions. As of early this week, the benchmark index was up 16.9% year-to-date (YTD) but down 2.6% from its annual high in July. The main drivers of the market volatility have been inflation, interest rates and the labor market. The Federal Reserve raised interest rates four times this year, reaching a target range of 5.25% to 5.5%, the highest level in 22 years. The Fed also signaled it is prepared to raise rates further if inflation remains too high. However, some economists believe the Fed is close to being done with its tightening cycle, as inflation has decelerated in the past two months. The consumer price index (CPI) rose 3.2% year-over-year (YoY) in July, down from a peak of 9.1% in June 2022.

Given this uncertain and challenging environment, investors may want to consider selling some of their stocks facing headwinds or that have become overvalued. Below are three good stocks to sell in September.

GoDaddy (GDDY)

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GoDaddy (NYSE:GGDY) is a leading provider of domain names, web hosting and online marketing services for small and medium-sized businesses (SMBs). Although the company grew its revenue and earnings steadily in the past, top-line growth has sputtered in 2022 and 2023. The slowing global economy is most likely to blame. GoDaddy specializes in servicing small businesses, and high inflation has taken a toll on both consumers and businesses. However, in times of economic uncertainty, larger enterprises tend to be more resilient than smaller ones. Thus, if you’re a tech company like GoDaddy whose customer base primarily consists of SMBs, the selling environment will be difficult.

In its second-quarter earnings report released in early August, GoDaddy reaffirmed this year’s lackluster annual revenue growth guidance. The company expects total revenue to grow 5.0% year-over-year (YoY), a few points down from last year’s 7.2% YoY topline growth. GoDaddy’s stock stayed relatively flat year-to-date. Without meaningful improvements in the selling environment, investors should consider selling GoDaddy.

Target (TGT)

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Target (NYSE:TGT) has been in the news lately — and not for good reason. Thefts and culture wars have put Target, its employees and its shares in a tough spot in 2023. The value of shares fell 19% since the start of the year and could go down even further.

For those unfamiliar, Target is one of the largest retailers in the United States, offering a wide range of products, including apparel, home, beauty, groceries and electronics. The company was performing well during the pandemic, as it benefited from its omnichannel capabilities, loyal customer base and strong merchandising strategy. However, inflation and controversy plagued Target recently.

In its second-quarter earnings report, Target reported its first decline in sales in six years, after inflation-weary consumers slowed their spending significantly and partially after a backlash against the company’s support of Pride Month.

As inflation remains elevated and some consumers turn away from Target’s brand, it is difficult to see how the company can recover in the short term. Before the situation worsens, investors should dump the stock while they still can.

PowerSchool Holdings (PWSC)

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PowerSchool Holdings (NYSE:PWSC) is a leading provider of cloud-based software solutions for the K-12 education sector. The educational technology (edtech) platform offers a variety of products, such as student information systems, learning management systems, assessment platforms and special education solutions.

The company went public in July 2021 at $18 per share, raising $711 million in its initial public offering (IPO), but shares plummeted 40% from their $35.88 high in 2021. The reason is twofold. The macroeconomic environment chipped away at demand for PowerSchool’s products. The analyst consensus is that PowerSchool will grow revenues by 9.6% YoY, a decline from last year’s 12.9% annualized growth.

The other threat to PowerSchool’s future growth is generative AI. In fact, the edtech industry, in general, is under threat from the rise of AI that could assist students with learning. That could eventually make some PowerSchool products obsolete. Investors should definitely use caution when holding PowerSchool’s shares as other technologies around AI develop.

On the date of publication, Tyrik Torres did not hold (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.

Tyrik Torres has been studying and participating in financial markets since he was in college, and he has particular passion for helping people understand complex systems. His areas of expertise are semiconductor and enterprise software equities. He has work experience in both investing (public and private markets) and investment banking.

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