3 Tech Stocks That Could Be Heading Six-Feet Under

Stocks to sell

Technology stocks had a great run in 2023. This year, not so much. In the past month, the tech-laden Nasdaq composite index has fallen 5%. Mega-cap tech stocks such as Apple (NASDAQ:AAPL) have faltered badly amid escalating concerns that interest rates will remain higher for longer. Possibly much longer. At the same time, notable tech leaders such as Apple appear in rapid decline, having lost their competitive edge and market share.

In time, the market and tech stocks will almost certainly get their mojo back. However, there look to be some technology companies that are facing existential threats that could eventually see them pushed out of business. Threats are taking the form of increased competition, disruptive technologies, and changing consumer tastes. History is littered with once mighty companies that lost their edge and never regained it.

Here are three tech stocks that could be heading six-feet under.

Adobe (ADBE)

Source: Tattoboo / Shutterstock

The stock of Adobe (NASDAQ:ADBE) hasn’t been the same since privately held OpenAI (the company behind ChatGPT) introduced Sora, an AI platform that can generate videos based on written descriptions. OpenAI’s Sora platform competes directly against many of Adobe’s creative software products and concerns are mounting that AI will ultimately put the company out of business. ADBE stock is down nearly 20% on the year following Sora’s debut and after the company issued weak forward guidance.

Adobe, whose suite of creative software products includes Photoshop and Illustrator, did manage to beat Wall Street forecasts with its latest earnings. However, the company forecast earnings of $4.35 to $4.40 a share and revenue of $5.25 billion to $5.30 billion for the current second quarter. That fell short of expected earnings of $4.38 a share and $5.31 billion in revenue, sending ADBE stock down 12% in a single trading session. Adobe is adding AI where it can, unveiling a new AI assistant for its Reader and Acrobat apps.

In a move that looks like it is waving the white flag, Adobe is reportedly now exploring a partnership with OpenAI and looking to add Sora’s technology to its products. The question is: will it be enough?

Tesla (TSLA)

Source: ssi77 / Shutterstock.com

Are things suddenly better at Tesla (NASDAQ:TSLA)? On the day of this writing, TSLA stock is up 12% as investors cheer the company’s plan to rush a more affordable electric vehicle to market. However, the euphoria over a cheaper electric car overlooks the fact that Tesla’s latest earnings print was terrible and showed that things are getting worse at the company. Much worse. For this year’s first quarter, Tesla reported its biggest revenue decline since 2012 as it missed Wall Street’s targets across the board.

Sales were down 9% from a year ago, while Tesla’s net income plunged 55% year-over-year. Tesla also issued a dismal outlook for the remainder of the year, stating that its “volume growth rate may be notably lower than the growth rate achieved in 2023.” Tesla continues to struggle with slowing electric vehicle sales and rising competition that has forced it to slash prices at the expense of profit margins. As for the more affordable EV, Tesla is famous for overpromising and underdelivering. Any sign of the “Tesla Bot” yet?

Despite the post-earnings lift, TSLA stock remains down 35% on the year and continues to be one of the worst performing stocks in the benchmark S&P 500 index.

Warner Bros. Discovery (WBD)

Source: Jimmy Tudeschi / Shutterstock.com

Warner Bros. Discovery (NASDAQ:WBD) has been trying to merge with another entertainment company or possibly sell itself as its stock slides lower. At the start of this year, the company was in merger talks with Paramount Global (NASDAQ:PARA), although the negotiations were called off in February. Warner Bros. is trying to achieve economies of scale as it struggles to earn profits from streaming while grappling with a decline in advertising revenue at its linear TV stations and dwindling audience attendance at movie theaters.

Warner Bros. Discovery is also labouring under a crushing debt load. While the company paid down $5.4 billion of debt in 2023, it still has $44.20 billion of debt remaining following its 2022 merger with Discovery Inc. Warner Bros. most recent earnings print was bad, with the company reporting a loss of 16 cents a share compared to a loss of 7 cents that was expected among analysts. Revenue in the fourth quarter of 2023 came in at $10.28 billion, which was below forecasts of $10.35 billion.

The litany of problems has weighed heavily on WBD stock, which is down 66% in the two years since Warner Bros Discovery was formed.

On the date of publication, Joel Baglole 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.

Joel Baglole has been a business journalist for 20 years. He spent five years as a staff reporter at The Wall Street Journal, and has also written for The Washington Post and Toronto Star newspapers, as well as financial websites such as The Motley Fool and Investopedia.

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