Amid stubbornly high inflation and consecutive rate hikes, the Consumer Confidence Index of the Conference Board fell to 100.2 in November, down from 102.2 in October. The index is at its lowest level since July.

Moreover, according to Goldman Sachs Group Inc. (GS) strategists, the bear market phase is expected to extend into 2023. They said, “The near-term path for equity markets is likely to be volatile and down.”

Although Deutsche Bank AG (DB) also believes the bear market bounce will extend well into 2023, the bank also expects a recession to hit the U.S. economy by mid-2023.

Given the backdrop, investors should avoid buying fundamentally weak stocks Carvana Co. (CVNA), Opendoor Technologies Inc. (OPEN), and Skillz Inc. (SKLZ).

Carvana Co. (CVNA)

CVNA and its subsidiaries operate an e-commerce platform for buying and selling used cars in the United States.

CVNA’s negative EBIT Margin of 7.78% is lower than the industry average of 7.90%, and its negative net income margin of 5.99% is lower than the industry average of 5.14%.

CVNA’s net sales and operating revenues came in at $3.39 billion for the third quarter that ended September 30, 2022, down 2.7% year-over-year. Its net loss came in at $283 million, up 784.4% year-over-year, while its loss per share came in at $2.67, up 602.6% year-over-year.

CVNA’s revenue is expected to decrease 14.5% year-over-year to $3.21 billion for the quarter ending December 2022. Its EPS is expected to decrease 110.8% year-over-year to negative $2.15 for the same period. It missed EPS estimates in all four trailing quarters. Over the past year, the stock has lost 97.3% to close the last trading session at $7.17.

CVNA’s weak fundamentals are reflected in its POWR Ratings. The stock’s overall F rating indicates a Strong Sell in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.

CVNA has an F grade for Growth, Stability, Sentiment, and Quality. In the F-rated Internet industry, it is ranked last among 59 stocks. Click here for the additional POWR Ratings for Momentum and Value for CVNA.

Opendoor Technologies Inc. (OPEN)

OPEN operates a digital platform for residential real estate in the United States. The company’s platform allows consumers to buy and sell a home online. In addition, it offers title insurance and escrow services.

OPEN’s negative EBIT Margin of 4.60% is lower than the industry average of 23.46%, and its negative net income margin of 6.93% is lower than the industry average of 17.19%.

OPEN’s gross loss came in at $425 million for the third quarter that ended September 30, 2022, compared to a gross profit of $202 million in the year-ago period. Its net loss came in at $928 million, up significantly year-over-year, while its loss per share came in at $1.47, up substantially year-over-year.

Street expects OPEN’s revenue to decrease 36.1% year-over-year to $2.44 billion for the quarter ending December 2022. Its EPS is expected to fall 169% year-over-year to negative $0.78 for the same period. It missed EPS estimates in three out of four trailing quarters. The stock has lost 88.3% over the past year to close the last trading session at $1.85.  

OPEN has an overall F rating, equating to a Strong Sell in our POWR Ratings system. It has an F grade for Growth, Stability, and Sentiment and a D for Quality and Momentum. It is ranked #40 out of 42 stocks in the F-rated Real Estate Services industry.

We have also rated OPEN for Value. Get all OPEN ratings here.

Skillz Inc. (SKLZ)

SKLZ connects players for fun and meaningful competition. The company primarily develops and supports a proprietary online-hosted technology platform that enables independent game developers to host tournaments and provide competitive gaming activity to end-users worldwide.

In terms of forward Price/Sales, SKLZ is currently trading at 1.49x, 19.2% higher than the industry average of 1.25x.

SKLZ’s negative EBIT Margin of 94.66% is lower than the industry average of 9.23%, and its negative net income margin of 115% is lower than the industry average of 4.51%.

SKLZ’s revenues came in at $60.26 million for the third quarter that ended September 30, 2022, down 41% year-over-year. Its net loss came in at $78.55 million, compared to a net profit of $50.78 million in the year-ago period. Moreover, its loss per share came in at $0.19, compared to an EPS of $0.13 in the prior year period.  

Analysts expect SKLZ’s revenue to decrease 28.2% year-over-year to $275.60 million in 2022. Its EPS is expected to fall 70.2% year-over-year to negative $0.80 in 2022. It missed EPS estimates in three of four trailing quarters. Over the past year, the stock has lost 89.5% to close the last trading session at $0.98. 

SKLZ’s overall D rating equates to a Sell in our POWR Ratings system. It has an F grade for Stability and Sentiment and a D for Momentum and Quality. The stock is ranked #19 out of 21 in the Entertainment – Toys & Video Games industry.

We’ve also rated SKLZ for Growth and Value. Get all the SKLZ ratings here.

CVNA shares were trading at $8.31 per share on Thursday afternoon, up $0.60 (+7.78%). Year-to-date, CVNA has declined -96.41%, versus a -13.09% rise in the benchmark S&P 500 index during the same period.

About the Author: Rashmi Kumari

Rashmi is passionate about capital markets, wealth management, and financial regulatory issues, which led her to pursue a career as an investment analyst. With a master's degree in commerce, she aspires to make complex financial matters understandable for individual investors and help them make appropriate investment decisions. More...

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