Moderating inflation for the sixth consecutive time in December 2022 substantiates that the Fed’s hawkish stance had its intended effect. However, as inflation remains significantly higher than the desired level of 2%, the Fed has clearly stated its intentions of rate hikes but at a slower pace.
Recently, the Federal Reserve raised interest rates by 0.25 percentage points, slowing the pace of its increases. The central bank’s benchmark overnight lending rate is now 4.50%-4.75%, marking the highest level since October 2007.
Fed Chairman Jerome Powell said, “We can now say I think for the first time that the disinflationary process has started.” However, on the flip side, he thinks it would be “very premature” to declare this a victory over inflation.
Although the stock market has rebounded recently, recessionary fears are still looming large. JPMorgan Asset Management’s chief global strategist, David Kelly, recently told Bloomberg that the Fed had won its war against inflation and further rate rises risk creating an economic plunge.
Against such volatilities, it would be wise if fundamentally weak stocks Advanced Micro Devices, Inc. (AMD) and Rivian Automotive, Inc. (RIVN) could be avoided now.
Advanced Micro Devices, Inc. (AMD)
AMD operates as a semiconductor company worldwide. The company operates in two segments, Computing and Graphics; and Enterprise, Embedded, and Semi-Custom.
AMD’s forward EV/Sales of 5.65x is 90.7% higher than the industry average of 2.96x. Its forward Price/Sales of 5.77x is 89.4% higher than the industry average of 3.05x.
AMD’s trailing-12-month ROCE of 4.24% is 14.7% lower than the industry average of 4.97%, while its trailing-12-month CAPEX/Sales of 1.75% is 30.8% lower than the industry average of 2.52%.
AMD’s non-GAAP operating income came in at $1.26 billion for the fourth quarter that ended December 31, 2022, down 5% year-over-year. Also, its non-GAAP net income decreased marginally year-over-year to $1.11 billion, while its non-GAAP EPS decreased 25% year-over-year to $0.69.
Street expects AMD’s revenue to decrease 9.9% year-over-year to $5.30 billion for the fiscal first quarter ending March 2023. Its EPS is expected to decline 50.1% year-over-year to $0.56 for the same quarter.
Over the past year, the stock has lost 28.1% to close the last trading session at $88.31. It has declined 11.1% over the past six months.
It is no surprise that the stock has an overall rating of D, which equates to Sell in our POWR Ratings system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
AMD has a D grade for Growth and Stability. Within the Semiconductor & Wireless Chip industry, it is ranked #87 out of 92 stocks.
Beyond what is stated above, we’ve also rated AMD for Value, Sentiment, Quality, and Momentum. Get all AMD ratings here.
Rivian Automotive, Inc. (RIVN)
RIVN designs, develops, manufactures, and sells electric vehicles and accessories. It offers five-passenger pickup trucks and sports utility vehicles and sells its products directly to customers in the consumer and commercial markets.
RIVN’s forward EV/Sales of 3.81x is 205.1% higher than the industry average of 1.25x. Its forward Price/Sales of 10.41x is 969.6% higher than the industry average of 0.97x.
RIVN’s trailing-12-month gross profit margin of negative 238.89% compares to the industry average of 35.41%, while its trailing-12-month ROCE of negative 127.70% compares to the industry average of 13%.
RIVN’s gross profit came in at negative $917 for the quarter that ended September 30, 2022, compared to negative $82 million for the quarter that ended September 30, 2021. Its loss from operations came in at $1.77 billion for the third quarter that ended September 30, 2022, up 128.6% year-over-year. Its net loss attributable to common stockholders increased 39.8% year-over-year to $1.72 billion.
Moreover, its cash and cash equivalents came in at $13.27 billion for the period that ended September 30, 2022, compared to $18.13 billion for the period that ended December 31, 2021.
RIVN’s EPS for the fiscal quarter ending March 2023 is expected to come in at negative $1.65, indicating a decline of 15.2%. Street expects its revenue to be $858.94 million.
The stock has fallen 67.5% over the past year to close the last trading session at $20.88. It has declined 40.4% over the past six months.
RIVN’s POWR Ratings reflect its weak fundamentals. The stock has an overall F rating, equating to a Strong Sell in our proprietary rating system.
The company has a D grade for Sentiment and an F for Value, Stability, and Quality. Within the D-rated 62-stock Auto & Vehicle Manufacturers industry, it is ranked #53.
Click here to see the other ratings of RIVN for Growth and Momentum.
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REVISED: 2023 Stock Market Outlook (includes top 7 picks)
AMD shares fell $0.47 (-0.53%) in premarket trading Friday. Year-to-date, AMD has gained 36.34%, versus a 8.98% rise in the benchmark S&P 500 index during the same period.
About the Author: Sristi Suman Jayaswal
The stock market dynamics sparked Sristi's interest during her school days, which led her to become a financial journalist. Investing in undervalued stocks with solid long-term growth prospects is her preferred strategy. Having earned a master's degree in Accounting and Finance, Sristi hopes to deepen her investment research experience and better guide investors. More...
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