The tech sector selloff that began in July gave investors the jitters. The best tech stocks were in freefall after carrying the Nasdaq 100 to new heights. In fact, the index is still in correction territory as it is down more than 10% from its all-time high.
Some of the leading names in the tech industry also remain lower by double-digit percentages. They might still be up by large amounts for the year, but Broadcom (NASDAQ:AVGO) is down 13% since the Nasdaq selloff, Amazon (NASDAQ:AMZN) is 14% lower and Nvidia (NASDAQ:NVDA) is down almost 18%. Yet, they weren’t the worst Nasdaq 100 stocks. Quite a few companies fared even worse.
Is this just a temporary setback, or is the rotation out of tech names and more small-cap positions a trend that will continue? Let’s take a closer look at the three worst Nasdaq 100 stocks that are down 40% on average from just one month ago to see whether you should buy them at these deeply discounted prices.
DexCom (DXCM)
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Medical device maker DexCom (NASDAQ:DXCM) focuses primarily on the Type 1 diabetes market. Its continuous glucose monitors (CGM) have been the leading product in the space for years, and it was looking to gain a foothold in the larger Type 2 diabetes market. Yet, DexCom stumbled hard in the second quarter, sending its stock crashing.
Revenue rose 15% to $1 billion, just missing analyst expectations. However, it handily beat earnings estimates by 4 cents per share, reporting adjusted profits of 43 cents. But what caused DXCM stock to plummet 40% was management slashing its full-year sales outlook. It previously guided toward revenue of $4.2 to $4.35 billion. Now it says to expect $4 to $4.05 billion, or $200 to $300 million less.
DexCom is experiencing significantly fewer patient starts than previously expected. It had 70,000 fewer new patients starts globally in Q2, or 25% fewer than what management forecast. While executives also see Q3 being down, it should regain its previous level in Q4. DexCom also lost market share in the durable medical equipment market. With slowing growth, it is hard to recommend DXCM stock at this juncture until it can show growth again.
Intel (INTC)
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Semiconductor stock Intel (NASDAQ:INTC) is falling further behind in the artificial intelligence (AI) chip race. The outlook for ever catching up seems bleak. Sales are falling, profits evaporated and Intel just said it was cutting over 15,000 jobs to control costs. Also, its dividend is now a thing of the past. The chipmaker eliminated the payout to further save money. There is little reason to wonder why INTC stock is down 43% since the tech selloff began.
Intel’s problems are structural. Although being vertically integrated should offer the chipmaker efficiencies and economies, it is not working out like that. Nvidia, Advanced Micro Devices (NASDAQ:AMD) and even Broadcom farm out the chip manufacturing process to third parties. Intel is also a foundry and owning the means of production comes at a cost. It is looking to save $10 billion in costs in 2025.
Wall Street has now drastically revised its outlook. Where analysts had been looking for $1.08 per share in earnings, they now see just 27 cents. They are looking for a drop in sales too, down to $52.3 billion. Investors should stay away from Intel stock.
Super Micro Computer (SMCI)
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The worst Nasdaq 100 stock is Super Micro Computer (NASDAQ:SMCI). It’s stock is down 42% since the tech selloff began. While it was one of the best performers beforehand, and the stock is still up over 80% in 2024, earnings also did in the AI server maker.
While second-quarter revenue rocketed 144% higher to $5.3 billion, its results showed profit margins were dramatically compressing. Gross margins narrowed 580 basis points to just 11.2%, indicating its expenses were significantly rising. As competition in the space is keen, Super Micro seemingly wanted to maintain its market share and didn’t pass along its higher input costs to its customers.
The impact was felt on the bottom line as adjusted earnings per share shot 78% higher to $6.25 per share but that was way short of Wall Street’s forecast for $8.07 per share.
Although management thinks it can get margins back up toward its previous levels, it is not the easy path it once looked like. Wall Street now sees revenue growth quickly decelerating. It forecasts a 77% jump this year to $26.5 billion but then it falls off a cliff in fiscal 2026. Analysts project just 19% growth that year to $31.64 billion.
Whenever a company is expected to see growth falter, investors would be wise to sit on the sidelines until the dust settles.
On the date of publication, Rich Duprey 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.
On the date of publication, the responsible editor did not have (either directly or indirectly) any positions in the securities mentioned in this article.
Rich Duprey has written about stocks and investing for the past 20 years. His articles have appeared on Nasdaq.com, The Motley Fool, and Yahoo! Finance, and he has been referenced by U.S. and international publications, including MarketWatch, Financial Times, Forbes, Fast Company, USA Today, Milwaukee Journal Sentinel, Cheddar News, The Boston Globe, L’Express, and numerous other news outlets.
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