The stock market has been significantly weighed down this year by the onslaught of consecutive interest rate hikes. This is evident from the S&P 500’s more than 22% slide this year.
Further, the Fed’s officials are adamant about keeping interest rates high until inflation cools down. They have also reiterated their expectations of further rate hikes. And this has raised recessionary fears.
Fitch Ratings expects the economy to enter recession territory in the second quarter of 2023, similar to that of 1990–1991. Moreover, the Conference Board’s probability model shows a 96% likelihood of a U.S. recession within the next 12 months.
Given this backdrop, the fundamentally weak stocks Marvell Technology, Inc. (MRVL), Plug Power Inc. (PLUG), Riot Blockchain, Inc. (RIOT), and Timber Pharmaceuticals, Inc. (TMBR) might be best avoided. These stocks are down more than 30% year-to-date and might continue on their downtrend.
Marvell Technology, Inc. (MRVL)
MRVL designs, develops, and markets analog, mixed-signal, digital signal processing, embedded, and standalone integrated circuits. The company offers Ethernet solutions and storage products.
In terms of its forward P/E, MRVL is trading at 468.99x, significantly higher than the industry average of 20.22x. Its forward EV/Sales multiple of 5.92 is 136.6% higher than the industry average of 2.5.
For the fiscal second quarter ended July 30, MRVL’s total non-GAAP operating expenses increased 17.8% year-over-year to $431.60 million. Net cash used in investing activities rose 239.2% from the prior-year quarter to $129.90 million. Its current liabilities stood at $2.16 billion as of July 30, compared to $1.39 billion as of January 29.
Its EPS is expected to come in at $0.59 for the quarter ending October 2022. For the third quarter, the company expects its non-GAAP operating expenses to be $435-$440 million.
The stock has declined 43.8% over the past year and 56.9% year-to-date to close its last trading session at $37.74. It is trading lower than its 50-day moving average of $46.99 and 200-day moving average of $58.24.
MRVL’s POWR Ratings reflect this bleak outlook. The stock has an overall D rating, 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.
The stock has a Value, Stability, and Quality grade of D. In the 93-stock Semiconductor & Wireless Chip industry, it is ranked #82.
Click here to see the additional POWR Ratings for MRVL (Growth, Momentum, and Sentiment).
Plug Power Inc. (PLUG)
PLUG provides end-to-end clean hydrogen and zero-emissions fuel-cell solutions internationally. The company sells its products through a direct product sales force, original equipment manufacturers, as well as dealer networks.
On October 14, PLUG announced that its earlier $900-$925 million revenue guidance for fiscal 2022 could be 5%-10% lower as some project completions are expected to be pushed back to 2023 due to broader supply chain issues.
PLUG’s total cost of revenue increased 11.5% year-over-year to $183.73 million in the fiscal second quarter that ended June 30. Net loss rose 73.9% from the prior-year quarter to $173.30 million. Net loss per share increased 66.7% from the same period the prior year to $0.30.
The consensus EPS estimate of a negative $0.22 for the quarter that ended September 2022 indicates a 15.8% year-over-year decrease.
The stock is down 41.4% over the past year and 32.3% year-to-date to close its last trading session at $19.11. PLUG is trading lower than its 50-day and 200-day moving averages of $25.28 and $22.38, respectively.
It’s no surprise that PLUG has an overall F rating, which translates to a Strong Sell in our POWR Ratings system.
PLUG has an F grade for Stability, Sentiment, and Quality and a D for Growth and Value. It is ranked #89 in the 90-stock Industrial – Equipment industry.
To see the additional POWR Rating for Momentum for PLUG, click here.
Riot Blockchain, Inc. (RIOT)
RIOT engages in Bitcoin (BTC) mining operations in North America. It operates through Bitcoin Mining; Data Center Hosting; and Electrical Products and Engineering segments.
In the consecutive months of August and September, RIOT produced 374 BTC and 355 BTC, down approximately 15% and 13% from their respective prior-year months.
RIOT’s operating loss for the fiscal second quarter ended June 30 increased significantly from the year-ago value to $366.01 million. Net income and net income per share declined significantly year-over-year to a negative $366.33 million and a negative $2.81.
Street EPS estimate for the current year (fiscal 2022) of a negative $2.49 reflects a considerable year-over-year decline.
Over the past year, the stock has declined by 80.3%. It has declined 73.7% year-to-date to close its last trading session at $5.87. It’s trading lower than its 50-day and 200-day moving averages of $7.23 and $11.12, respectively.
RIOT’s poor prospects are reflected in its POWR Ratings. The stock has an overall F rating, equating to a Strong Sell in our proprietary rating system.
RIOT has a Stability, Sentiment, and Quality grade of F and a Value and Momentum grade of D. In the 77-stock Technology – Services industry, it is ranked #76. The industry is rated D.
Click here to see the additional POWR Rating for Growth for RIOT.
Timber Pharmaceuticals, Inc. (TMBR)
TMBR is a clinical-stage biopharmaceutical company that develops and commercializes orphan dermatologic disease treatments. The company’s lead product candidates include TMB-001 and TMB-002.
In August, TMBR announced that it had received a deficiency letter from NYSE American LLC stating that the company was not in compliance with the continued listing standards. The exchange’s staff determined that TMBR’s continued listing is predicated upon sustained price improvement within a time period or a reverse stock split of its common stock.
TMBR’s loss from operations increased 216.9% year-over-year to $9.40 million in the fiscal second quarter that ended June 30. Net loss attributable to common stockholders and net loss per share attributable to common stockholders came in at $9.50 million and $0.15, up 216.3% and 87.5% from the prior-year period, respectively.
Street expects TMBR’s EPS to come in at a negative $0.23 for the fiscal year ending December 2022.
TMBR’s shares have declined 87.6% over the past year and 76.8% year-to-date to close its last trading session at $0.09. The stock is trading lower than its 50-day and 200-day moving averages of $0.11 and $0.25, respectively.
TMBR’s overall F rating translates to a Strong Sell in our POWR Ratings system. The stock has an F grade for Quality and a D grade for Momentum, Stability, and Sentiment. It is ranked #480 in the 495-stock Biotech industry. The industry is rated F.
In addition to the POWR Rating grades we’ve stated above, one can see TMBR ratings for Growth and Value here.
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MRVL shares were trading at $38.10 per share on Wednesday morning, up $0.36 (+0.95%). Year-to-date, MRVL has declined -56.27%, versus a -21.14% rise in the benchmark S&P 500 index during the same period.
About the Author: Anushka Dutta
Anushka is an analyst whose interest in understanding the impact of broader economic changes on financial markets motivated her to pursue a career in investment research. More...
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