Say Goodbye to these Three Failing Blue-Chip Stocks in February

Published On: February 19, 2024 1:55 pm

It’s always disheartening to witness once-powerful companies slipping into the doldrums of decline. However, historical precedence suggests that even the most formidable names can plummet from grace. Reflecting on the harsh fates of companies like Eastman Kodak, Compaq Computer, and F.W. Woolworth, it’s essential for investors to discern when a household brand is grappling with irrevocable, long-term issues. While any company can experience a rough patch, persistent struggles may warrant divesting from a stock that has evolved into a drag on investment portfolios. Here are three ailing blue-chip stocks to bid adieu to this February.

Cisco Systems (CSCO)

Cisco Systems (NASDAQ:CSCO) made headlines recently by divulging its plan to slash 5% of its workforce, amounting to approximately 4,250 jobs, due to anticipated decelerating growth. Although the technology behemoth reported respectable financials for its fiscal second quarter, it provided a gloomy outlook for the ongoing quarter and the entirety of the year. Consequently, this news led to a 6% plunge in CSCO stock, further perpetuating the long-standing descent of this once colossus company. Over the past five years, Cisco’s shares have plummeted by 3%.

Cisco foresees a profit of $0.86 on sales of $12.30 billion for the current quarter. Disappointingly, these figures fall short of analysts’ projections of earnings amounting to $0.92 on $13.09 billion in revenue. For the entire year, Cisco anticipates earnings per share (EPS) of $3.74 and revenue of $52.50 billion. However, these outlooks also pale in comparison to Wall Street’s expectations of $3.86 in earnings and $54.26 billion in sales. Concurrently, Cisco is grappling with the arduous task of finalizing its $28 billion acquisition of monitoring and security software manufacturer Splunk (NASDAQ:SPLK), a substantial pill to swallow.

Nike (NKE)

In a similar vein, sports footwear and attire titan Nike (NYSE:NKE) recently announced intentions to cut 2% of its global workforce, equating to over 1,600 jobs, in an endeavor to curtail expenses amid soft demand and uncertainty. This announcement follows a series of unfavorable developments at Nike. In January, the company cautioned that retail outlets are paring down their orders for its athletic shoes and apparel through wholesale channels. Additionally, Nike continues to grapple with the effects of China’s economic slowdown, its second largest market.

Notably, last December, Nike unveiled a $2 billion cost-saving blueprint over the ensuing three years while divulging lackluster earnings. The cost-cutting measures encompass a reduction in managerial roles and $450 million earmarked for employee severance costs. Nevertheless, Nike’s market standing continues to erode in the face of emerging brands like Deckers Outdoor’s (NYSE:DECK) Hoka running shoes, hinting at a worrisome long-term trend that is weighing on NKE stock — down 3% year-to-date and 17% over the past 12 months.

eBay (EBAY)

eBay Layoffs: A Shift in the E-Commerce Industry

eBay’s Workforce Reduction

eBay (NASDAQ:EBAY) has recently joined the ranks of companies implementing significant layoffs in response to a decline in sales. The e-commerce giant disclosed its intention to terminate 9% of its workforce, amounting to approximately 1,000 full-time employees, to rein in costs and reduce expenditures. Additionally, eBay revealed plans to “scale back the number of contracts we have” in 2024. Corporate leadership emphasized the necessity of these job cuts, citing a scenario where expenses had outpaced the company’s growth over recent years.

Stock Performance and Setbacks

In the last autumn season, eBay issued a revenue guidance for the year-end holiday sales period that fell significantly short of Wall Street estimates. Consequently, the company’s stock experienced a pronounced decline. Shortly thereafter, at the beginning of this year, eBay became subject to a $3 million criminal penalty settlement in relation to a harassment campaign orchestrated by former employees. These developments have adversely affected EBAY stock, driving it down by 1% since the beginning of the year and marking a 10% decline over the past 12 months, signaling an opportune moment to divest.

Author’s Position

On the date of publication, Joel Baglole held a long position in DECK. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Joel Baglole, a seasoned business journalist of 20 years, brings a wealth of experience to his work. With a notable tenure as a staff reporter at The Wall Street Journal, Baglole has also contributed to The Washington Post, the Toronto Star, and prominent financial websites such as The Motley Fool and Investopedia.