The right stocks can make you rich and change your life. The wrong ones, though, can do far more damage than simply underperforming. They can erode your wealth, eating away at your hard-earned profits. These are the stocks that act as pure portfolio poison, and while not all investors like to confront this reality, it’s essential to know when to walk away.
Here are three companies that investors should reconsider holding. If you own any of these “toxic stocks,” it may be time to sell.
Tesla (TSLA) – Tariffs, Competition, and Margin Pressure Could Weigh on Shares
- Tesla has faced a rough start to the year, and the latest tariff concerns aren’t helping. With Trump’s 25% tariffs on Canadian and Mexican imports and potential trade tensions with China, Tesla’s supply chain and profitability could take a hit.
- China is a key growth market for Tesla, with its Shanghai Gigafactory driving production and exports. But with China imposing up to 15% retaliatory tariffs on select U.S. goods, Tesla could see higher component costs.
- Competition from Chinese EV makers like BYD is intensifying, which could pressure Tesla’s market share in China and beyond.
- Tesla’s margins are already shrinking as it cuts vehicle prices to stay competitive. If tariffs raise production costs, profitability could erode further.
- The stock has already lost more than 5% this week, and with trade tensions escalating, the risks are stacking up. Long-term investors may want to reassess their position as economic and industry headwinds grow.
SoundHound AI (SOUN) – Too Much Hype, Not Enough Substance
- SoundHound AI has been a major winner since Election Day, surging 165% on AI enthusiasm. But the company has yet to prove it can turn partnerships into long-term profitability.
- Recent deals with Torchy’s Tacos and Church’s Texas Chicken have generated optimism, but these alone don’t justify the stock’s extreme valuation.
- Over the past 12 months, SoundHound has posted just $67 million in revenue while losing $111 million. At a price-to-sales ratio of 65, the stock is trading at sky-high levels without the earnings to back it up.
- For the rally to continue, SoundHound needs to show a clear path to profitability. Until then, it’s riding on speculation rather than fundamentals.
- With AI stocks under increasing scrutiny, now may be the time to take profits before the hype fades.
Ford Motor Company (F) – Rising Skepticism Ahead of Earnings
- Ford has seen strong stock gains recently, but analysts are increasingly cautious about its earnings outlook. Estimates have been slashed by 18% in the last three months, and the average price target has dropped by 19%.
- A major concern is rising inventory levels, which could put pressure on pricing and margins in 2025. Ford benefited from inventory replenishment in 2024, but that tailwind won’t carry over this year.
- Barclays recently downgraded Ford to equal weight, citing structural challenges in the auto industry.
- With weaker earnings expectations, growing analyst skepticism, and potential margin compression, Ford could be in for a rough earnings season. Investors may want to reconsider their exposure before the next earnings report.