July 2nd, 2025
When it comes to investing, knowing when to sell is just as important as knowing what to buy. While most financial coverage focuses on buying opportunities, our research team has identified several companies facing significant challenges that investors should consider selling.
These stocks aren’t simply underperforming the market temporarily – they’re facing fundamental business problems, weakening financials, or carrying valuations that don’t match their current reality.
Our analysis isn’t based on short-term price movements or headline reactions. Each company has been thoroughly evaluated using multiple indicators that historically precede major stock declines.
Here are three stocks showing critical warning signs that demand your immediate attention:
QuantumScape (QS)
QuantumScape’s 13.53% Friday decline following a 50% weekly surge shows the extreme volatility in speculative technology investments where you either win big or lose everything. While the solid-state battery developer’s announcement of progress with its Cobra separator manufacturing process initially triggered explosive gains, the subsequent selloff reflects growing recognition that commercial success remains highly uncertain.
The company’s current $4 billion market cap against zero gross margin and no meaningful revenue streams represents pure speculation on future possibilities. Even if QuantumScape’s solid-state battery technology proves superior to current lithium-ion solutions, the automotive industry’s conservative approach to new technologies means years of testing, validation, and production scaling before meaningful revenue could materialize.
The numbers tell a sobering story:
- Stock remains down approximately 95% from its lifetime high despite this week’s rally
- Extraordinary trading volume of 108.6 million shares versus 18.6 million average
- Zero revenue and negative gross margins
- No dividend support
Most concerning is QuantumScape’s track record since going public through a SPAC merger in November 2020. This history shows how speculative technology companies can destroy shareholder value even when achieving technical milestones.
With no cash flows expected for years, QuantumScape requires perfect execution across multiple variables including technology development, manufacturing scale-up, customer adoption, and competitive positioning. While success could generate exceptional returns, the probability-weighted outcome heavily favors substantial losses.
Winmark (WINA)
Winmark faces a perfect storm of demographic problems and valuation concerns that threaten its premium stock price. The resale retailer’s Plato’s Closet brand, which targets 18-24 year-old consumers, is experiencing significant pressure as this crucial demographic reduces spending by 13% year-over-year according to Circana market research.
Particularly damaging trends include:
- 11% decline in apparel spending
- 18% drop in accessories purchases
- Resumed student loan payments affecting young adults
- Challenging job market for target demographic
- Mounting credit card pressures
These factors create sustained rather than temporary headwinds for the company’s core business. Despite Winmark’s impressive 96.11% gross margin reflecting its asset-light franchise model, operational performance has already shown weakness with profits declining in 2024 and growth projections of only 6-7% for the next two years.
At $375.03 per share with a market cap of approximately $1 billion, Winmark trades at 33 times trailing earnings and 30 times free cash flow – valuations that require sustained growth to justify. The modest 0.97% dividend yield provides minimal compensation for these elevated multiples.
With average trading volume suggesting limited liquidity and structural challenges facing the target demographic, Winmark appears vulnerable to significant corrections if spending trends among young consumers continue deteriorating.
Rigetti Computing (RGTI)
Rigetti Computing shows the dangers of investing in speculative technology companies that burn cash while facing overwhelming competition from tech giants. Despite the quantum computing specialist’s dramatic run from roughly $1 to over $21 per share following breakthrough error correction news, the stock has surrendered 48% of those gains as reality sets in about the company’s fundamental challenges.
The financial picture is troubling:
- Annual revenue of just $10.8 million in 2024 (down from $12 million in 2023)
- Net losses nearly tripling to $201 million
- Negative 15.18% gross margin
- R&D expenses of $50 million against $10 million in sales
- Outstanding shares increasing by 61.7% over the past year due to dilution
The competitive landscape is particularly daunting, with Google Quantum AI, IBM, Nvidia, and even the Chinese government pursuing similar superconducting quantum technologies. Notably, the very breakthrough that sparked Rigetti’s stock surge came from Google’s research rather than Rigetti’s own efforts, highlighting the company’s position as a follower rather than a leader.
Nvidia CEO Jensen Huang’s comment that practical quantum systems could be “20 years away” provides a sobering reality check for investors betting on near-term commercialization.
At $11.09 with a market cap of $3 billion despite minimal revenue and massive losses, the stock trades at speculative multiples that assume breakthrough commercial success. Rigetti’s reliance on continuous share dilution to fund operations creates an unsustainable business model that constantly hurts existing shareholders.
Bottom Line
This week’s featured stocks show three distinct types of speculative investments that can destroy shareholder value despite compelling stories. QuantumScape represents a binary technology bet with massive downside risk, Winmark confronts demographic headwinds that undermine its premium valuation, and Rigetti Computing faces overwhelming competition and unsustainable cash burn in the quantum computing race.
In each case, current valuations appear to reflect best-case scenarios that ignore fundamental challenges, competitive pressures, or extended commercialization timelines. These situations highlight the importance of distinguishing between compelling technologies and viable investments, particularly when prices assume perfect outcomes across multiple uncertain variables.