The Federal Reserve last month raised benchmark interest rates by 75 basis points for the third consecutive time to tame soaring inflation. Furthermore, the hot September employment report should keep the Fed on track to deliver a further hefty interest-rate hike in its November meeting.
“Until I see some evidence that underlying inflation has solidly peaked and is hopefully headed back down, I’m not ready to declare a pause. I think we’re quite far from a pause,” said Minneapolis Fed President Neel Kashkari.
The Fed’s persistent hawkish stance is increasing the odds of a recession. The Conference Board’s probability model has predicted a 96% likelihood of a recession in the United States within the next 12 months. In addition, the Board expects the fourth quarter of 2022 and the first quarter of 2023 to witness negative real GDP growth rates.
The tech-heavy Nasdaq Composite yesterday fell 1.04%, hitting its lowest close since July 2020. The S&P 500 has declined 0.75%, while the Dow Jones lost 0.32%. Notably, the CBOE’s volatility index has gained 91.7% year-to-date, reflecting heightened market volatility.
High-beta stocks tend to be highly correlated with the broader markets and are prone to huge losses in a highly volatile environment. Thus, we think fundamentally weak, high-volatility stocks AST SpaceMobile, Inc. (ASTS), Rain Therapeutics Inc. (RAIN), and Core Scientific, Inc. (CORZ) are best avoided now.
AST SpaceMobile, Inc. (ASTS)
ASTS operates a space-based cellular broadband network for standard mobile phones. The company’s SpaceMobile service makes mobile broadband services accessible for users traveling in areas without terrestrial mobile services on land, at sea, or in flight. It has a 24-month beta of 1.63.
In the fiscal 2022 second quarter ended June 30, 2022, ASTS’ operating expenses increased 41.1% from the year-ago value to $35.40 million. Its loss before income tax expense came in at $7.97 million. In addition, the company’s net loss attributable to common stockholders came in at $2.92 million, translating to a net loss per share of $0.06.
Also, cash outflows from operating and investing activities came in at $88.51 million and $33.60 million, up 130.7% and 80.7% year-over-year, respectively. As of June 30, 2022, the company’s cash and cash equivalents were $202.37 million, compared to $321.79 million as of December 31, 2022.
ASTS’ loss per share for the fiscal year 2022 (ending December 2022) is expected to come in at $0.60. In addition, analysts expect the company’s loss per share for fiscal 2023 to widen by 21.1% from the previous year to $0.73. Its revenue for the next year is expected to decline 48.1% year-over-year to $7.10 million.
Shares of ASTS have declined 26.3% over the past six months and 27.5% over the past year to close the last trading session at $7.31.
ASTS’ POWR Ratings are consistent with this bleak outlook. The company has an overall rating of F, which translates to a Strong Sell in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
ASTS has a grade of F for Stability and Quality and a D for Value. ASTS is ranked #17 out of 20 stocks in the D-rated Telecom-Domestic industry.
We have also rated ASTS for Momentum, Growth, and Sentiment. Get all ASTS ratings here.
Rain Therapeutics Inc. (RAIN)
RAIN is a clinical-stage precision oncology company that engages in developing therapies that target oncogenic drivers. The company’s lead product candidate, Milademetan, is a small molecule, oral inhibitor of double mouse minute 2, which is oncogenic in various cancers. It has a 24-month beta of 1.62.
RAIN’s loss from operations widened 116.4% year-over-year to $17.72 million in the fiscal 2022 second quarter ended June 30, 2022. Its net loss worsened by 115.2% from the prior-year period to $17.61 million. The company’s loss per share came in at $0.66, indicating a widening of 69.2% year-over-year.
Furthermore, the company’s cash, cash equivalents, and short-term investments stood at $105.75 million as of June 30, 2022, compared to $140.22 million as of December 31, 2021.
Analysts expect RAIN’s loss per share for the current year (ending December 2022) to widen by 0.2% from the previous year to $2.66. In addition, the company’s loss per share for the next year is expected to come in at $2.24. The stock has plunged 19% over the past month and 65.1% year-to-date to close the last trading session at $4.78.
RAIN’s weak fundamentals are reflected in its POWR Ratings. The stock’s overall D rating translates to a Sell in our proprietary rating system.
RAIN has an F grade for Momentum. Within the F-rated Biotech industry, it is ranked #204 of 383 stocks.
Click here to see RAIN’s additional POWR Ratings (Growth, Stability, Quality, Sentiment, and Value).
Core Scientific, Inc. (CORZ)
CORZ operates best-in-class purpose-built facilities to mine digital assets. The company also provides blockchain infrastructure, software solutions, and services. It operates in two segments: Equipment Sales and Hosting. CORZ is one of North America’s largest net carbon-neutral blockchain infrastructure hosting providers and digital asset mining companies. It has a 24-month beta of 2.72.
For the fiscal 2022 second quarter ended June 30, 2022, CORZ’s operating expenses increased 1,190.6% year-over-year to $115.89 million. The company reported a gross profit of $12.72 million, down 48.2% year-over-year. Its operating loss stood at $1.05 billion, compared to a $15.53 million operating income reported in the same period last year.
In addition, the company’s net loss came in at $810.48 million, translating to a $2.49 loss per share. This compares to a net loss of $3.41 million and a net loss per share of $0.02 reported in the prior-year quarter. Its total liabilities came in at $1.43 billion as of June 30, 2022, versus $1.05 billion as of December 31, 2022.
Analysts expect CORZ’s loss per share for the fiscal year (ending December 2022) to come in at $1.57. The consensus EPS estimate for the fiscal 2023 first quarter (ending March 2023) indicates a decline of 61.3% from the previous year’s period.
Shares of CORZ have slumped 84.2% over the past six months and 87.4% over the past year to close the last trading session at $1.29.
CORZ’s weak prospects are apparent from its POWR Ratings. It has an overall rating of D, equating to a Sell in our proprietary rating system.
It has an F grade for Stability and a D for Quality and Sentiment. It is ranked #63 out of 78 stocks in the D-rated Technology – Services industry. Click here to see the other ratings of CORZ for Growth, Value, and Momentum.
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ASTS shares were trading at $7.16 per share on Tuesday afternoon, down $0.15 (-2.05%). Year-to-date, ASTS has declined -9.82%, versus a -23.08% rise in the benchmark S&P 500 index during the same period.
About the Author: Mangeet Kaur Bouns
Mangeet’s keen interest in the stock market led her to become an investment researcher and financial journalist. Using her fundamental approach to analyzing stocks, Mangeet’s looks to help retail investors understand the underlying factors before making investment decisions. More...
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|RAIN||Get Rating||Get Rating||Get Rating|
|CORZ||Get Rating||Get Rating||Get Rating|