The tech-heavy Nasdaq composite is down about 25% year-to-date and is expected to keep losing on concerns over rising interest rates and a potential recession this year. The rising interest rate environment has significantly affected the capital-intensive tech industry, as their borrowing costs have increased considerably.
The August inflation report came in hotter than anticipated, undermining investor hopes for falling prices and less aggressive interest rate hikes. The Nasdaq composite was down 4.3% at the time of writing this article earlier today.
The Fed’s hawkish stance, bolstered by the hot inflation report, could lead to a prolonged sell-off in the technology sector, causing losing tech stocks Snowflake Inc. (SNOW), Affirm Holdings (AFRM), and American Cloud Virtual Technologies (AVCT) to decline further. So, we think these stocks are best avoided now.
Snowflake Inc. (SNOW)
SNOW operates a cloud-based data platform in the United States and internationally. The company’s platform includes Data Cloud, which allows customers to consolidate data into a single source of truth to drive meaningful business insights, build data-driven applications, and share data.
During the second quarter ended June 30, 2022, SHOP’s revenue increased 82.7% year-over-year to $497.25 million. However, its operating loss grew 3.8% from the year-ago value to $207.73 million. The company’s net loss surged 17.5% from the prior-year quarter to $222.81 million. Its loss per share amounted to $0.70.
Analysts expect SNOW’s EPS to decline 66.7% in the quarter ending January 2023. The stock has declined 38.7% over the past year and 42.4% year-to-date.
SNOW’s POWR Ratings are consistent with this bleak outlook. The stock’s overall D rating translates 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.
SNOW has been graded a D for Stability, Value, and Quality. Within the D-rated Technology – Services industry, it is ranked #73 of 81 stocks.
To see additional POWR Ratings for Growth, Sentiment, and Momentum for SNOW, click here.
Affirm Holdings (AFRM)
AFRM operates a digital and mobile-first commerce platform in the United States and Canada. The company’s platform includes a POS payment solution for consumers, merchant commerce solutions, and a consumer-focused app.
AFRM’s total revenue increased 39.1% year-over-year to $364.13 million for the fourth quarter ended June 30, 2022. However, its operating loss increased 142.6% from the year-ago value to $277.23 million. Its net loss surged 51% from the prior-year quarter to $186.39 million. Its loss per share amounted to $065.
Its EPS is expected to decline 36.8% in the quarter ending December 2022 and 15.9% in fiscal 2023. The stock has declined 78.3% over the past year and 73.4% year-to-date.
AFRM’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 stock has an F grade for Stability and Sentiment and a D for Quality. In the Technology – Services industry, it is ranked #80.
In addition to the POWR Ratings grades I have just highlighted, you can see the AFRM rating for Momentum, Growth, and Value here.
American Cloud Virtual Technologies (AVCT)
AVCT provides global cloud communications. The company is focused on offering a range of services, including unified cloud communications, managed services, cyber security, and enhanced connectivity. In addition, it has strategic partnerships with AT&T, IBM, and Etisalat to sell various solutions.
AVCT’s total revenue decreased 24.8% year-over-year to $3.72 million for the second quarter ended June 30, 2022. The company reported a gross loss of $1.55 million, compared to a gross profit of $1.38 million in the prior-year quarter. Its loss from continuing operations grew 105.6% from the prior-year quarter to $24.01 million.
Street expects AVCT’s revenues to decline 11.5% year-over-year to $103.59 million in fiscal 2022. The stock has declined 94.3% over the past year and 91.3% over the past month.
AVCT’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 Quality and a D for Growth and Stability. AVCT is ranked #73 in the same industry.
Click here to see the additional POWR Ratings for AVCT (Momentum, Sentiment, and Growth).
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SNOW shares were trading at $188.60 per share on Tuesday afternoon, down $6.61 (-3.39%). Year-to-date, SNOW has declined -44.32%, versus a -16.03% 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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