3 Stocks to Sell Before Earnings Season

Buying and holding stocks for the long run is a great strategy for building wealth over time. However, companies change, and some investments that looked solid a few years ago may turn out to be duds if you give them more time to stretch.

For instance, Kraft Heinz (NASDAQ: KHC) used to be a solid dividend stock that could outperform the stock market, but it has dropped tremendously from its all-time highs, with a full recovery looking nearly impossible.

The stock market is filled with companies that performed well over long stretches, encountered fundamental problems, and never rebounded. These three stocks have those same risks, and it may be better to bail out on these picks before they next report earnings, rather than hoping for a rebound.

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Etsy

Etsy (NYSE: ETSY) seemed to do everything right in the mid-2010s and was thrust into the spotlight as a top pandemic stock. Custom face masks flooded the online marketplace and attracted customers seeking products they couldn't find on other e-commerce platforms.

Etsy initially capitalized on its pandemic-fueled growth, but the wheels fell off, resulting in an 80% drop from all-time highs. The main culprit has been decelerating gross merchandise sales, which reflects all of the sales across Etsy's platform. This figure dropped by 5.3% year over year in 2025. The figure is a little more promising in the fourth quarter if you exclude Reverb sales, and is up by 2.4% year over year with that stipulation. Etsy recently sold its Reverb segment, so it is fair to remove it from the Q4 comparison.

The company also sold its Depop business to eBay (NASDAQ: EBAY) for $1.2 billion. That's not a good look when Etsy bought the same business for $1.625 billion in 2021.

Active buyers and sellers both decreased year over year in Q4, and net income dropped along with them. While revenue was up year over year, Etsy offset a GMS slowdown with online advertising and fees. That's not a winning formula in the long run if customers and sellers keep leaving. Etsy will likely report its next quarterly earnings in mid-May.

Nike

Nike (NYSE: NKE) has been on the decline for multiple years, but some investors saw a glimmer of hope when Apple CEO Tim Cook bought 50,000 shares in the final days of 2025. Nike's CEO also loaded up on shares at the same time, and that type of insider investing made people excited.

The stock has been brought back to reality with its 31% year-to-date decline. Once heralded as a dividend growth stock, Nike has turned into a dividend income stock with its 3.6% yield, and recent developments do not suggest a rebound is on the way.

Nike has been struggling with revenue growth for a while. It has a -2.27% CAGR over the past three years, meaning the company has been actively losing market share to its competitors. That trend continued in the third quarter of fiscal 2026 (ending Feb. 28), as Nike reported flat year-over-year revenue.

The main growth engine -- wholesale revenue -- was up by 5% year over year. However, that part of the business was balanced out by a 4% year-over-year decline in Nike Direct revenue. Growth in North America was the main reason for improved wholesale revenue, but Nike has already tapped deeply into that market. China sales also dipped 7% year over year, a recurring theme for one of Nike's most important markets.

It remains to be seen if Nike can deliver long-term meaningful growth in that region, but recent revenue CAGR trends don't offer much optimism. Nike will likely release its next earnings report in late June.

Tesla

While Etsy and Nike represent lost potential, Tesla (NASDAQ: TSLA) is a risky pick going into earnings for the opposite reason. Optimus, Tesla's humanoid robots and autonomous vehicles, can potentially drive substantial sales growth, but those two catalysts haven't been realized yet.

That hasn't stopped Tesla from exceeding a $1 trillion market cap, a feat that is only possible because Elon Musk is the CEO. Investors are more willing to pay high premiums under his leadership.

Still, Tesla faces growth obstacles. Revenue dipped by 3% year over year throughout 2025. Automobile sales still make up the bulk of the underlying business, and that segment was down by 10% year over year. Tesla should also face tough comps this year since the EV tax credit has been discontinued. GAAP net income attributable to shareholders also dropped by 46% in 2025.

Tesla is turning itself into a physical AI and energy company. In the long run, electric vehicles may not even make up half of Tesla's total sales. However, a price-to-earnings (P/E) ratio above 300 indicates immediate valuation risk, as long-term growth initiatives haven't yet materialized meaningfully. Tesla should report earnings at the end of April, which will provide investors with new information about its business segments.

Marc Guberti has positions in Apple. The Motley Fool has positions in and recommends Apple, Etsy, Nike, Tesla, and eBay and is short shares of Apple. The Motley Fool recommends Kraft Heinz. The Motley Fool has a disclosure policy.