In the wake of the Fed’s first interest rate hike since December 2018, Federal Reserve Governor Lael Brainard has recommended a more aggressive approach to curb inflation amid the Russia-Ukraine war and an exacerbation of logistical challenges. This, along with further Western sanctions against Russia, has dampened investor sentiment despite hopes of a steady economic recovery. This is evident in the SPDR S&P 500 Trust ETF’s (SPY) 2.5% decline over the past five days.
Mark Zandi, the chief economist at Moody’s Analytics, said, “Ultimately, the way this is going to work, the economy is going to slow, the stock market has to reflect that.” Furthermore, rising COVID-19 cases in several states might negatively affect economic recovery in the coming quarters.
Since the market is expected to remain volatile in the coming months, popular yet overvalued stocks Hycroft Mining Holding Corporation (HYMC), SoFi Technologies, Inc. (SOFI), DraftKings Inc. (DKNG), and Opendoor Technologies Inc. (OPEN) could witness a downtrend. So, we think these stocks are best avoided now.
Hycroft Mining Holding Corporation (HYMC)
HYMC in Denver, Colo., together with its subsidiaries, operates as a gold and silver development company in the United States. The company holds interests in the Hycroft mine, which covers an area of approximately 70,671 acres in Nevada. Its Hycroft mine has measured and indicated mineral resources of around 9.60 million ounces of gold and 446 million ounces of silver.
On November 28, 2021, Pomerantz LLP commenced investigating claims on behalf of investors of HYMC on concerns about whether the company and certain of its officers and/or directors have engaged in securities fraud or other unlawful business practices. This is expected to have affected the company’s growth prospects.
HYMC’s gold production came in at 57,668 ounces for the period ended Dec. 31, 2021, exceeding the high end of the guidance range. However, its silver production came in at 355,967 ounces, down approximately 20% below guidance. And its unrestricted cash decreased by $44 million, while its net loss came in at $88.60 million.
HYMC’s 207.92x forward EV/S is significantly higher than the 1.72x industry average.
HYMC’s revenue is expected to decrease 97.6% to $2.70 million in its fiscal year 2022. Its EPS is expected to remain negative in 2022 and 2023. Over the past year, the stock has declined 48.8% in price to close yesterday’s trading session at $2.10.
HYMC’s POWR Ratings reflect its poor prospects. It has an overall D grade, which indicates a Sell. The POWR Ratings assess stocks by 118 distinct factors, each with its own weighting.
Also, the stock has an F grade for Quality and a D grade for Momentum. Click here to access the additional POWR Ratings for HYMC (Growth, Value, Stability, and Sentiment). HYMC is ranked #25 of 42 stocks in the F-rated Miners – Gold industry.
SoFi Technologies, Inc. (SOFI)
SOFI provides digital financial services. The San Francisco concern operates through three segments: Lending; Technology Platform; and Financial Services. The company offers student loans, personal loans for debt consolidation and home improvement projects, and home loans.
On March 3, 2022, SOFI announced the completion of its acquisition of Technisys S.à.r.l. However, this might not yield immediate results given its inconsistent financials.
SOFI’s adjusted net revenue came in at $279.88 million for the fourth quarter, ended Dec. 31, 2021, up 53.8% year-over-year. However, its net loss increased 34.4% year-over-year to $111.01 million. Its adjusted EBITDA came in at $4.59 million, down 61.1% year-over-year. The company’s cash and cash equivalents were $494.71 million for the period ended Dec. 31, 2021, compared to $872.58 million for the period ended Dec. 31, 2020.
SOFI’s 5.14x forward P/S is 65.5% higher than the 3.11x industry average.
Analysts expect SOFI’s EPS to remain negative in 2022 and 2023. Over the past year, the stock has in price declined 49.3% to close yesterday’s trading session at $8.75.
SOFI has an overall F grade, which equates to a Strong Sell in our POWR Ratings system. Also, it has an F grade for Stability and a D grade for Value, Sentiment, and Quality.
DraftKings Inc. (DKNG)
DKNG in Boston operates as a digital sports entertainment and gaming company in the United States and internationally. It operates through two segments–Business-to-Consumer and Business-to-Business.
On March 7, 2022, Argus Research analyst downgraded DKNG to “hold” from “buy” on concerns that the company could face fierce competition, with its revenue growth slowing in response to regulatory headwinds.
For its fiscal year ended Dec. 31, 2021, DKNG’s revenue came in at $1.30 billion, up 110.9% year-over-year. However, its loss from operations increased 85.2% year-over-year to $1.56 billion, while its net loss increased 23.7% year-over-year to $1.52 billion. Furthermore, its total liabilities came in at $2.39 billion for the period ended Dec. 31, 2021, compared to $807.98 million for the period ended Dec.31, 2020.
DKNG’s 3.62x forward P/S is 300% higher than the 0.91x industry average.
DKNG’s EPS is expected to remain negative in 2022 and 2023. Also, its EPS is estimated to decrease by 6.8% per annum over the next five years. Over the past year, the stock has declined 72.3% in price to close yesterday’s trading session at $17.68.
DKNG’s POWR Ratings are consistent with this bleak outlook. The stock has an overall F rating, which equates to a Strong Sell in our proprietary rating system. In addition, the stock has an F grade for Stability and Sentiment and a D grade for Growth, Value, and Quality.
Opendoor Technologies Inc. (OPEN)
OPEN in San Francisco operates a digital platform for residential real estate in the United States. The company’s platform enables consumers to buy and sell a home online. It also provides title insurance and escrow services.
OPEN’s revenue came in at $3.82 billion for the fourth quarter ended Dec. 31, 2021, up 1,434.9% year-over-year. However, its net loss increased 253.7% year-over-year to $191 million, while loss per share came in at $0.31, compared to a $0.30 loss per share in the year-ago period. In addition, its total current liabilities were $4.40 billion for the period ended Dec. 31, 2021, compared to $393 million for the period ended Dec. 31, 2020.
OPEN’s 2.29x trailing-12-month Price/Book is 13.9% higher than the 2.01x industry average.
OPEN’s EPS is estimated to remain negative in 2022 and 2023. The stock has declined 65.3% over the past year to close yesterday’s session at $7.58.
OPEN has an overall D grade, which indicates a Sell. Also, the stock has an F grade for Stability and a D grade for Sentiment and Quality.
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HYMC shares were trading at $2.09 per share on Thursday morning, down $0.01 (-0.48%). Year-to-date, HYMC has gained 240.56%, versus a -5.56% rise in the benchmark S&P 500 index during the same period.
About the Author: Riddhima Chakraborty
Riddhima is a financial journalist with a passion for analyzing financial instruments. With a master's degree in economics, she helps investors make informed investment decisions through her insightful commentaries. More...
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