While the Nasdaq is still in a bear market, the tech-heavy index actually had a strong October, finishing the month up 3.9%. Despite those gains, which seemed to come on hopes for a Fed pivot, the Nasdaq actually trailed both the S&P 500 and the Dow Jones Industrial Average. Top tech stocks like Amazon, Alphabet, and Meta Platforms fell sharply on their earnings reports, weighing on the broader tech index, and showing that the economy could be headed for recession.
Sometimes sell-offs can lead to buying opportunities, though. Let's take a look at two of the worst stocks in the Nasdaq in October to see if either of them are worth buying.
TuSimple runs into a wall
TuSimple (TSP +0.00%) became the latest vehicle technology stock to blow up last month when news broke that the FBI and SEC were investigating it on charges of financing and transferring technology to a Chinese start-up, Hydron.
The next day the TuSimple board fired CEO Xiaodi Hou. In a statement, the company said that the termination was in response to an ongoing investigation by the audit committee, though it seems likely that the probe from the SEC and FBI played a role in the matter.
NASDAQ: TSP
Key Data Points
TuSimple announced its third-quarter earnings report that same day, Oct. 31. The company, which has minimal revenue, reported an operating loss in the quarter of $120 million, and said it surpassed 9 million autonomous miles driven in the quarter, calling it a major milestone.
The stock finished the month down 55%, and has continued to slide since then. On Nov. 10, the company brought back formerly ousted executive Cheng Lu to serve as permanent CEO.
At this point, TuSimple is in disarray, and the investigation from the SEC and FBI is still hanging over its head. Additionally, the autonomous vehicle industry has been a disappointment thus far, in part due to regulatory red tape, and it seems unlikely that autonomous trucking will go mainstream before passenger vehicles. TuSimple stock is best avoided.
Meta meets its match
Facebook parent Meta Platforms (META 2.33%) was also one of the Nasdaq's worst performers in October as the company badly missed the mark in its third-quarter earnings report. The stock fell 25% on the news.
In October, Meta lost 31% as the company said revenue declined by 4% in the quarter, and it missed earnings estimates after it lost $3.7 billion on reality labs, its division working on the metaverse. Management also said that its loss in reality labs would expand significantly in 2023, indicating that its loss next year could swell to $15 billion-$20 billion as it's on track to hit around $13 billion this year.
NASDAQ: META
Key Data Points
Though the company said it planned to control spending on reality labs in order to grow overall operating profit starting in 2024, the news indicated that its profits were likely to shrink further in 2023.
In the wake of that earnings report, Meta announced that it was laying off 11,000 employees, or 13% of staff, which the company estimates will save $1 billion-$2 billion in annual expenses. The layoffs show CEO Mark Zuckerberg taking investor concerns seriously as the cash burn from reality labs may be getting out of hand. The company also lowered its guidance for total expenses next year.
Meta stock rose on the layoff news, but the stock is still cheap based on conventional valuation metrics. Despite that price, Meta still carries a lot of risk depending on how the metaverse experiment goes. Unless it gains traction with reality labs, the tech stock is unlikely to make a significant recovery.
