The stock market has been witnessing wild swings this year amid the months-long bout of historically high inflation and the Fed’s series of significant interest rate hikes to tamp it down. The CBOE Volatility Index has gained 57.8% year-to-date.

Moreover, according to the latest National Association for Business Economics survey, nearly two-thirds of corporate economists believe the U.S. is already in a recession or will be within the next 12 months.

NABE Business Conditions Survey Chair Jan Hogrefe, also serving as chief economist for Boeing Commercial Airplanes, said, “Profit margins have contracted, on balance, with more respondents reporting falling rather than rising profit margins for the first time since mid-2020.”

Given the widespread bearish sentiments, fundamentally weak stocks Shopify Inc. (SHOP - Get Rating) and Carnival Corporation & plc (CCL - Get Rating) could be risky investments now.

Shopify Inc. (SHOP - Get Rating)

Headquartered in Ottawa, Canada, SHOP is a commerce company that provides a commerce platform and services in Canada, the United States, Europe, the Middle East, Africa, the Asia Pacific, and Latin America.

In terms of forward Price/Sales, SHOP is currently trading at 6.74x, 169.7% higher than the industry average of 2.50x. The stock’s forward EV/Sales multiple of 5.87 is 119.7% higher than the industry average of 2.67.

SHOP’s negative EBIT Margin of 4.27% is lower than the industry average of 7.07%, and its negative net income margin of 38.01% is lower than the industry average of 3.87%.

SHOP’s loss from operations came in at $345.37 million for the third quarter that ended September 30, 2022, up 8321.5% year-over-year. Its net loss came in at $158.41 million, compared to a net profit of $1.14 billion for the previous period. Also, its loss per share came in at $0.12, compared to EPS of $0.90 for the prior period.

SHOP’s EPS is expected to decrease 119% year-over-year to negative $0.16 in 2022. Over the past year, the stock has lost 78.7% to close the last trading session at $29.06.

SHOP’s POWR Ratings are consistent with this bleak outlook. It has an overall rating of F, equating to a Strong Sell in our POWR Ratings system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.

SHOP has a D grade for Value, Stability, Sentiment, Growth, Momentum, and Quality. It is ranked last among 29 stocks in the F-rated Internet – Services industry. Get all SHOP ratings here.

Carnival Corporation & plc (CCL - Get Rating)

CCL operates as a leisure travel company. Its ships operate under the Carnival Cruise Line, Princess Cruises, Holland America Line, P&O Cruises (Australia), Seabourn, Costa Cruises, AIDA Cruises, P&O Cruises (UK), and Cunard brand names.

In terms of forward EV/sales, CCL is currently trading at 3.16x, 192.7% higher than the industry average of 1.08x. The stock’s forward Price/Sales multiple of 0.88 is 7.2% higher than the industry average of 0.82.

Its negative EBIT Margin of 50.38% is lower than the industry average of 8.11%, while its negative net income margin of 73.98% is lower than the industry average of 5.59%.

CCL’s operating costs and expenses came in at $4.59 billion for the third quarter ended August 31, 2022, up 76.1% year-over-year. Its total current liabilities came in at $12.95 billion for the period ended August 31, 2022, compared to $10.41 billion for the period ended November 30, 2021. Also, its total current assets came in at $8.43 billion, compared to $10.13 billion for the same period.

The company’s EPS is expected to remain negative for the fiscal year ending November 2022. CCL has lost 60.3% over the past year to close the last trading session at $8.67.  

CCL has an overall D rating, equating to Sell in our POWR Ratings system. It has an F grade for Stability and Sentiment and a D for Quality and Value. It is ranked #2 out of 4 stocks in the F-rated Travel – Cruises industry.

We have also rated CCL for Growth and Momentum. Get all CCL ratings here.

SHOP shares were trading at $34.26 per share on Thursday afternoon, up $5.20 (+17.89%). Year-to-date, SHOP has declined -75.13%, versus a -19.00% 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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