A zero-commission policy, free stock disclosures, and related services provided by the Robinhood online investing app made it a big hit among millennials amid the COVID-19 pandemic. Robinhood generated $682 million in payment for order flow in 2020, a 514% increase year-on-year.
While U.S.’ accelerated recovery from the COVID-19 pandemic is likely to continue over the coming months, rising geopolitical tensions amid surging inflation and increasing Treasury yields have been causing volatility in the stock markets. Consequently, many stocks that are popular with Robinhood investors that gained primarily based on market hype are currently suffering selloffs. Their lofty valuations and poor growth prospects are the primary reasons behind investors’ rotation away from them.
Given their weak fundamentals and growth prospects, popular Robinhood stocks Palantir Technologies Inc. (PLTR), Carnival Corporation (CCL), and BlackBerry Limited (BB) look highly overvalued at the current price levels, according to Wall Street analysts. So, we think they are best avoided now.
Palantir Technologies Inc. (PLTR)
PLTR delivers a suite of software applications for integrating, visualizing, and analyzing information and serves commercial businesses and governments worldwide. Its software allows analysts within and between organizations to collaborate and to analyze large quantities of data.
In May, the United States Special Operations Command (USSOCOM) awarded a $111 million contract to PLTR to continue its work as USSOCOM’s enterprise data management and AI-enabled mission command platform, which is a part of the Mission Command System/Common Operational Picture program. PLTR’s technology enables real-time collaboration across USSOCOM and its allies, giving its commanders situational awareness at a global scale, bringing AI to the battlefield, and improving the ability to respond to near-peer threats. PLTR is looking forward to developing efficient solutions and continuing this partnership over the long-term.
For its fiscal year 2021 first quarter, ended March 31, PLTR’s cost of revenue increased 15.3% year-over-year to $74.11 million. The company’s total operating expenses came in at $381.14 million, up 62% from the prior-year period. It had cash and cash equivalents of $2.45 billion, as of March 31, 2021.
However, a consensus EPS estimate for the next quarter, ending September 30, 2021, represents a 50.2% year-over-year decline. In terms of non-GAAP forward P/E, PLTR is currently trading at 164.54x, 537.5% higher than the 25.81x industry average. And in terms of its forward EV/Sales, the stock is currently trading at 29.21x, 586.5% higher than the 4.26x industry average. PLTR has declined by 2.8% over the past three months and closed yesterday’s trading session at $24.46. Wall Street analysts expect the stock to hit $21.75 in the near-term, which represents a potential 11.1% downside.
PLTR’s POWR Ratings are consistent with this bleak outlook. The stock has an overall D rating, which equates to Sell in our proprietary system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
The stock has an F grade for Value and Sentiment, and a D grade for Stability. We have also graded PLTR for Momentum, Quality and Growth. Click here to access all PLTR’s ratings.
PLTR is ranked #11 of 13 stocks in the F-rated Software – SAAS industry.
Carnival Corporation (CCL)
CCL is a leisure travel company that offers cruise services and vacations. The company provides port destinations and other services, and owns and operates hotels, lodges, glass-domed railcars, and motor coaches. It sells its cruises primarily through travel agents and tour operators.
Yesterday, CCL’s Carnival Cruise Line announced its plans to return to guest operations from Port of Galveston on July 3 with Carnival Vista, followed by the return of operations of Carnival Breeze on July 15. In accordance with the guidelines provided by the U.S. Centers for Disease Control and Prevention (CDC), these cruises will be available for guests who have received their final dose of COVID-19 vaccine. CCL hopes to generate good sales in the coming months amid a rising number of advance hotel and cruise bookings.
CCL’s financial prospects are not promising. For its fiscal 2021 first quarter, ended February 28, CCL’s revenues declined 99.5% year-over-year to $26 million. Its revenue from its passenger ticket section decreased 99.9% year-over-year to $3 million. Its operating loss increased 113.7% year-over-year to $1.52 billion. Its adjusted net loss came in at $1.95 billion for the quarter, compared to $150 million in net income in the first quarter of 2020. Also, the company’s adjusted loss per share was $1.79, compared to a $0.22 EPS in the prior-year period.
Analysts expect the company’s EPS to remain negative for the coming quarters in its fiscal year 2021, ending November 30, 2021. Also, CCL’s EPS is expected to decline at a $115.6% rate per annum over the next few years.
CCL’s valuation ratios are much higher than its peers. In terms of its forward EV/Sales, CCL’s 15.37x is 883% higher than the 1.56x industry average. In terms of forward Price/Sales, the stock is currently trading higher than the industry average (9.65x versus 1.35x). The stock closed yesterday’s session at $30.89. Wall Street analysts expect the stock to hit $29.50 in the near term, which indicates a potential 4.5% downside.
It’s no surprise that CCL has an overall F rating, which equates to Strong Sell in our POWR Ratings system.
The stock has an F grade for Stability, Sentiment, Value and Quality, and a D grade for Growth. Click here to see the additional POWR Ratings for CCL’s Momentum.
CCL is ranked #4 of 4 stocks in the F-rated Travel – Cruises industry.
BlackBerry Limited (BB)
BB is a Canada-based company that provides security software and services to enterprises and governments worldwide. The company leverages artificial intelligence (AI) and machine learning to deliver solutions in the areas of cybersecurity, safety and data privacy, and offers endpoint security management, encryption, and embedded systems.
BB launched BlackBerry Optics 3.0, its next-generation cloud-based endpoint detection and response (EDR) solution, and BlackBerry Gateway, the company’s first AI-empowered Zero Trust Network Access (ZTNA) product on May 17. Available since the second quarter of 2021, the company hopes these products, which are rooted in a prevention-first and AI-driven approach, will provide enhanced visibility and protection against current and future cyberthreats. The company expects to generate good sales amid heightened demand for cybersecurity from various enterprises.
However, BB’s financials are not promising. For its fiscal year 2021 fourth quarter, ended February 28, 2021, BB’s adjusted revenue declined 26.1% year-over-year to $215 million. The company’s adjusted gross profit came in at $158 million, down 29.1% from the prior-year period. Its adjusted operating income came in at $18 million, which represents a 64.7% year-over-year decline. While its adjusted income declined 68.6% year-over-year to $16 million, its adjusted EPS decreased 66.7% year-over-year to $0.03.
Analysts expect BB’s EPS to remain negative in the coming quarters of its fiscal year 2022, ending February 28, 2022. Also, the consensus revenue estimate for the current quarter ending August 31, 2021, is $171.04 million, which represents a 32.4% year-over-year decline. BB’s EPS is expected to decline at a 21.9% rate per annum over the next five years.
Also, in terms of forward EV/EBITDA, BB’s 173.11x is 930.5% higher than the 16.80x industry average. Its 9.84x forward Price/Sales is also significantly higher than the 4.01x industry average. BB closed yesterday’s trading session at $15.77. Analysts expect the stock to hit $9 in the near term, which indicates a 42.9% potential downside.
BB’s poor prospects are also apparent in its POWR Ratings. The stock has an F grade for Sentiment, and a D grade for Quality and Stability. In addition to the POWR Ratings grades we’ve just highlighted, one can see BB’s ratings for Growth, Value and Momentum here.
The stock is ranked #53 of 55 stocks in the B-rated Technology – Communication/Networking industry.
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PLTR shares were trading at $24.39 per share on Tuesday afternoon, down $0.07 (-0.29%). Year-to-date, PLTR has gained 3.57%, versus a 13.38% rise in the benchmark S&P 500 index during the same period.
About the Author: Sweta Vijayan
Sweta is an investment analyst and journalist with a special interest in finding market inefficiencies. She’s passionate about educating investors, so that they may find success in the stock market. More...
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