Equities endured a challenging 2022 due to geopolitical headwinds, high inflation, and the Fed’s aggressive interest rate hikes. With the central bank raising interest rates to the highest level since 2008, inflation showed signs of cooling off in the last three months of 2022.
Inflation came below analyst expectations for the third consecutive month in December, as the Consumer Price Index (CPI) increased by 6.5% over last year and decreased 0.1% sequentially. Although progress has been made in bringing inflation down from its high of 9.1% year-over-year rise in June, the central bank remains committed to bringing inflation down to its 2% target.
Moreover, the U.S. jobless claims for the week ended January 7, 2023, fell to their lowest level in more than three months, signaling continued tightness in the labor market. Minutes from the Fed’s policy meeting in December showed that the central bank officials expect higher interest rates to remain this year.
Therefore, a pause in interest rates is highly unlikely this year. Hence, the economy and the stock market are expected to remain under pressure.
Peloton Interactive, Inc. (PTON)
PTON provides a connected, technology-enabled interactive fitness platform. The company offers services like instructor-led boutique classes for its customers. Also, its product portfolio includes Peloton Bike, Peloton Bike+, Tread and Tread+, bike mat, heart rate monitor, and dumbbells.
On October 6, 2022, PTON announced laying off 500 employees, its fourth job elimination exercise last year, indicating continued pressure on the company to stay afloat.
PTON’s 19.23% trailing-12-month gross profit margin is 46% lower than the 35.58% industry average. Likewise, its trailing-12-month EBIT margin is negative compared to the 7.96% industry average. Furthermore, the stock’s trailing-12-month EBITDA margin is negative, compared to the industry average of 11.05%.
PTON’s total revenue declined 23.4% year-over-year to $616.50 million for the first quarter ended September 30, 2022. Its revenue from connected fitness products decreased 59.2% year-over-year to $204.20 million. The company’s net loss widened 8.6% year-over-year to $408.50 million. Also, its loss from operations widened 4% from the prior-year quarter to $374 million.
Analysts expect PTON’s EPS for the quarter ending December 31, 2022, to remain negative. Its revenue for the quarter ending December 31, 2022, is expected to decline 37.2% year-over-year to $712.52 million. Over the past year, the stock has declined 63.3% to close the last trading session at $11.09.
PTON’s weak fundamentals are reflected in its POWR Ratings. The stock has an overall F rating, equating to a Strong 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 Stability and Sentiment and a D for Value and Quality. It is ranked #55 out of 57 stocks within the Consumer Goods industry. Click here to see the other ratings of PTON for Growth and Momentum.
Opendoor Technologies Inc. (OPEN)
OPEN operates a digital platform for residential real estate in the United States. Its platform enables consumers to buy and sell homes online.
On November 2, 2022, OPEN announced that it was cutting 550 jobs or about 18% of its workforce, indicating a slowdown in its business.
OPEN’s trailing-12-month net income margin is negative compared to the 17% industry average. Likewise, its trailing-12-month EBIT margin is negative compared to the 23.42% industry average. Furthermore, the stock’s trailing-12-month levered FCF margin is negative, compared to the industry average of 38.15%.
OPEN’s adjusted gross profit for the fiscal third quarter ended September 30, 2022, declined 52.8% year-over-year to $110 million. Its adjusted net loss rose significantly to $328 million. Its adjusted EBITDA loss came in at $211 million, compared to an adjusted EBITDA of $35 million. Additionally, its net loss per share attributable to common shareholders widened significantly from the prior-year quarter to $1.47.
For the quarter ending December 31, 2022, OPEN’s loss per share is expected to widen 177.6% year-over-year to $0.86. Its revenue for the fourth quarter is expected to decline 35.5% year-over-year to $2.46 billion. Over the past year, the stock has fallen 84.8% to close the last trading session at $1.62.
OPEN’s POWR Ratings reflect this bleak outlook. The stock has an overall rating of F, equating to a Strong Sell in our proprietary rating system.
It has an F grade for Growth, Stability, and Sentiment and a D for Momentum and Quality. Within the F-rated Real Estate Services industry, it is ranked #42 out of 44 stocks. To see OPEN’s rating for Value, click here.
Bed Bath & Beyond Inc. (BBBY)
BBBY operates as a retail store chain. The company sells domestic merchandise, bath items, kitchen textiles, and home furnishings.
On January 18, 2023, according to CNBC, BBBY is in talks with prospective buyers and lenders as it tries to keep its business afloat ahead of a bankruptcy filing. According to the report, the company is in the middle of a sale process, and its advisors are looking for a loan of at least $100 million before the potential bankruptcy filing.
BBBY’s trailing-12-month net income margin is negative compared to the 5.18% industry average. Likewise, its trailing-12-month EBIT margin is negative compared to the 7.96% industry average. Furthermore, the stock’s trailing-12-month EBITDA margin is negative, compared to the industry average of 11.05%.
BBBY’s net sales declined 33% year-over-year to $1.26 billion for the third quarter ended November 26, 2022. Its gross profit decreased 58.3% year-over-year to $278.86 million. The company’s adjusted net loss widened significantly to $331.23 million. Also, its adjusted loss per share widened significantly to $3.65. In addition, its adjusted EBITDA loss came in at $224.99 million, compared to adjusted EBITDA of $40.64 million.
Analysts expect BBBY’s EPS for the quarter ending February 2023 to remain negative. Its revenue for the current quarter is expected to decline 32.3% year-over-year to $1.39 billion. It failed to surpass the consensus EPS estimates in each of the trailing four quarters. Over the past year, the stock has declined 72% to close the last trading session at $3.94.
BBBY’s POWR Ratings reflect this bleak outlook. It has an overall F rating, which translates to a Strong Sell in our proprietary rating system. It is ranked #57 out of 60 stocks within the Home Improvement & Goods industry.
It has an F grade for Stability and Sentiment and a D for Quality. To see the other ratings of BBBY for Growth, Value, and Momentum, click here.
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PTON shares were trading at $10.30 per share on Thursday morning, down $0.79 (-7.12%). Year-to-date, PTON has gained 29.72%, versus a 1.42% rise in the benchmark S&P 500 index during the same period.
About the Author: Dipanjan Banchur
Since he was in grade school, Dipanjan was interested in the stock market. This led to him obtaining a master’s degree in Finance and Accounting. Currently, as an investment analyst and financial journalist, Dipanjan has a strong interest in reading and analyzing emerging trends in financial markets. More...
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