The stock market has been on a wild ride since the beginning of this year due to macroeconomic and geopolitical headwinds. While the benchmark indexes witnessed a solid recovery in July thanks to better-than-expected corporate earnings and favorable economic data, the market’s prospects look bleak again. The red-hot July jobs report has raised concerns over the elevated inflation lingering longer, which could affect the Fed’s upcoming interest-rate increases.

According to BofA’s Michael Hartnett, “the stock market is poised to hit new lows later this year following July’s hot job report because inflation is likely to linger and the Fed will be forced to continue tightening financial conditions.” Hartnett expects the S&P 500 to trade below 3,600, representing a potential downside of 13% from the current level.

Since the macroeconomic environment is likely to remain challenging, it could be wise to avoid fundamentally weak stocks Coinbase Global, Inc. (COIN) and Roku, Inc. (ROKU). These stocks are rated Strong Sell or Sell in our proprietary POWR Ratings system.

Coinbase Global, Inc. (COIN)

COIN is a financial technology company that provides end-to-end economic infrastructure and technology. The company offers the primary financial account in the crypto economy for retailers, a marketplace with a pool of liquidity for transacting in crypto assets for institutions, and technology and services that enable ecosystem partners to build crypto-based applications and securely accept crypto-asset payments.

On July 21, 2022, the SEC announced insider trading charges against COIN’s former employee Ishan Wahi, accusing him of leaking information to his brother Nikhil Wahi and friend Sameer Ramani that COIN would list at least 25 crypto assets for trading on its platform.

COIN’s net revenue for the fiscal second quarter ended June 30, 2022, declined 63.7% year-over-year to $808.32 million. Its total operating expenses increased 36.9% year-over-year to $1.85 billion. 

The company’s net loss came in at $1.09 billion, compared to a net income of $1.61 billion in the year-ago period. Also, its loss per share came in at $4.98, compared to an EPS of $6.42 a year ago.

Analysts expect COIN’s EPS to remain negative for fiscal 2022. Its revenue for the quarter ending September 30, 2022, is expected to decline 38.5% year-over-year to $806.05 million. Over the past nine months, the stock has lost 75.5% to close the last trading session at $87.68.

COIN’s weak fundamentals are reflected in its POWR Ratings. It has an overall rating of D, equating to a Sell in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.

It has an F grade for Growth, Stability, and Sentiment and a D for Value. It is ranked #134 out of 153 stocks in the F-rated Software – Application industry. Click here to see the other ratings of COIN for Momentum and Quality.

Roku, Inc. (ROKU)

ROKU operates a TV streaming platform through two segments: Platform and Player. Its platform enables users to discover and access various streaming content and content publishers to build and monetize large audiences. ROKU’s streaming players and TV-related audio devices are available through direct retail sales and licensing arrangements with service operators.

For the fiscal second quarter ended June 30, 2022, ROKU’s operating loss came in at $110.51 million compared to an operating income of $69.08 million. The company’s net loss came in at $112.32 million, compared to a net income of $73.47 million in the year-ago period. 

Also, its loss per share came in at $0.82, compared to an EPS of $0.52 in the year-ago period. In addition, its adjusted EBITDA loss came in at $12.07 million, compared to an adjusted EBITDA of $122.43 million in the year-ago period.

Analysts expect ROKU’s EPS for fiscal 2022 to remain negative. The stock has lost 80.4% over the past year to close the last trading session at $78.10.

ROKU’s POWR Ratings are consistent with this bleak outlook. It has an overall F rating, equating to a Strong Sell in our proprietary rating system.

It has an F grade for Growth, Stability, and Sentiment and a D for Value. Within the Consumer Goods industry, it is ranked #55 out of 59 stocks. To see the other ratings of ROKU for Momentum and Quality, click here.

COIN shares were trading at $89.41 per share on Wednesday morning, up $1.73 (+1.97%). Year-to-date, COIN has declined -64.57%, versus a -11.41% rise in the benchmark S&P 500 index during the same period.

About the Author: Shweta Kumari

Shweta's profound interest in financial research and quantitative analysis led her to pursue a career as an investment analyst. She uses her knowledge to help retail investors make educated investment decisions. More...

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