The Consumer Price Index (CPI) for August increased 8.3% year over year, topping market expectations. This led the Fed to declare its third straight 75-basis-point rate increase in September, sparking worries about an economic slump.
The market has remained erratic due to worries of an impending recession, as seen by the CBOE Volatility Index’s year-to-date increase of nearly 76.5%. Furthermore, in contrast to earlier forecasts of 3.25% to 3.5%, Fed officials now expect the key rate to end this year between 4.25% and 4.5%.
Moreover, as the market is projected to remain turbulent, we believe fundamentally weak stocks Snap Inc. (SNAP), Norwegian Cruise Line Holdings Ltd. (NCLH), and ContextLogic Inc. (WISH) are best avoided now.
Snap Inc. (SNAP)
SNAP is a camera company. Snapchat, the company’s flagship product, is a camera app that allows users to interact visually with friends and family via brief movies and photographs known as Snaps. The firm has roughly 319 million daily active users.
SNAP’s revenue increased 13% year-over-year to $1.11 billion for the second quarter that ended June 30, 2022. However, its operating loss grew 108% from the year-ago value to $400.94 million. The company’s net loss increased 178% from the prior-year quarter to $422.07 million. Its non-GAAP loss per share amounted to $0.02. In addition, its adjusted EBITDA declined 94% year-over-year to $7.19 million.
Analysts expect SNAP’s EPS to decline 86% in fiscal 2022 and 105.9% in the quarter that ended September 2022. The stock has declined 84.5% over the past year and 21.5% over the past three months.
SNAP’s POWR Ratings are consistent with this bleak outlook. The stock has an overall rating of F, which translates 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.
SNAP has been graded an F for Stability and a D for Growth and Sentiment. Within the F-rated Internet industry, it is ranked #57 of 63 stocks.
To see additional POWR Ratings for Quality, Value, and Momentum for SNAP, click here.
Norwegian Cruise Line Holdings Ltd. (NCLH)
NCLH and its subsidiaries operate as a cruise line in North America, Europe, Asia-Pacific, and worldwide. The company operates the Norwegian Cruise Line, Oceania Cruises, and Regent Seven Seas Cruises brands. It sells its products through retail/travel advisors, onboard cruise sales, meetings, incentives, and charters.
NCLH’s revenue increased significantly year-over-year to $1.19 billion for the second quarter that ended June 30, 2022. However, its net interest expense increased 5.2% from the year-ago value to $144.38 million. Its adjusted net loss came in at $478.3 million, while its adjusted loss per share amounted to $1.14.
Its EPS is expected to decline 165.1% per annum over the next five years. The stock has declined 51.8% over the past year and 35.9% year-to-date.
NCLH’s weak fundamentals are reflected in its POWR Ratings. The stock has an overall F rating, equating to a Strong Sell in our POWR Rating system. The stock has an F grade for Stability and a D for Value and Sentiment. In the F-rated Travel – Cruises industry, it is ranked last of the four stocks.
In addition to the POWR Rating grades I have just highlighted, you can see the NCLH rating for Momentum, Growth, and Quality here.
ContextLogic Inc. (WISH)
WISH operates as a mobile e-commerce company in Europe, North America, South America, and internationally. It operates the e-commerce platform Wish, which provides merchants with marketplace and logistics services.
WISH’s revenue decreased 79.6% year-over-year to $134 million for the second quarter that ended June 30, 2022. Its gross profit declined 89.1% from the prior-year quarter to $42 million. The company reported an operating loss of $91 million, while its net loss came in at $90 million. Its loss per share amounted to $0.13.
In addition, its cash and cash equivalents came in at $693 million, representing a decline of 31.3% for the six months that ended June 30, 2022.
Street expects EPS and revenue to decline 14% and 65.6%, respectively, in the current fiscal year. Also, its EPS is expected to remain negative in the current and next year. The stock has declined 82.3% over the past year and 31.1% over the past month.
WISH’s poor prospects are also apparent in its POWR Ratings. The stock has an overall D rating, which equates to a Sell in our proprietary rating system.
It also has an F grade for Stability and a D for Quality. WISH is ranked #52 in the Internet industry.
Click here to see the additional POWR Ratings for WISH (Momentum, Value, Sentiment, and Growth).
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SNAP shares fell $11.35 (-100.00%) in premarket trading Friday. Year-to-date, SNAP has declined -76.55%, versus a -21.41% rise in the benchmark S&P 500 index during the same period.
About the Author: Pragya Pandey
Pragya is an equity research analyst and financial journalist with a passion for investing. In college she majored in finance and is currently pursuing the CFA program and is a Level II candidate. More...
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