The Fed announced its third consecutive 75-bps interest rate hike last week, which has caused the benchmark indices to plunge. The S&P 500 has lost 5.2% over the past week and 23.3% year-to-date. Moreover, Goldman Sachs slashed its 2022 year-end S&P 500 target to 3600, down 16.3% from 4300.
According to Chris Zaccarelli, Chief Investment Officer, Independent Advisor Alliance, Charlotte, NC, “The Fed is going to raise rates until inflation comes back down, and they will cause a recession in the process.”
Also, Steve Hanke, a professor of applied economics at Johns Hopkins University, said, “The probability of recession, I think it’s much higher than 50%—I think it’s about 80%.”
Given the uncertain economic outlook, fundamentally weak stocks Uber Technologies, Inc. (UBER), Workhorse Group Inc. (WKHS), and AppHarvest, Inc. (APPH) might be best avoided for your retirement portfolio. These stocks do not pay dividends, which is the key requirement for a stock to be added to a retirement portfolio.
Uber Technologies, Inc. (UBER)
UBER develops and operates proprietary technology applications in the United States, Canada, Latin America, Europe, the Middle East, Africa, and the Asia Pacific. The company operates through three segments: Mobility; Delivery; and Freight.
On September 25, 2022, Pomerantz LLP announced the filing of a class action lawsuit against UBER and some of its officers, alleging violations of federal securities laws. The suit is on behalf of a class of all persons and entities except Defendants that purchased or acquired UBER common stock between May 31, 2019, and July 8, 2022.
UBER’s revenue came in at $8.07 billion for the second quarter that ended June 30, 2022, up 105.5% year-over-year. However, its net loss came in at $2.60 billion compared to an income of $1.14 billion in the year-ago period. Moreover, its loss per share came in at $1.33, compared to an EPS of $0.58 in the prior-year period.
UBER’s EPS is expected to decline 367% year-over-year to negative $4.67 in 2022. Its EPS is estimated to remain negative in 2023. It missed EPS estimates in three of the four trailing quarters. Over the past year, the stock has lost 42.3% to close the last trading session at $26.89.
UBER’s POWR Ratings reflect its poor prospects. It has an overall grade of D, which indicates a Sell. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
Also, the stock has a D grade for Value, Momentum, Stability, and Sentiment. Click here to access the additional POWR Ratings for UBER (Growth and Quality). UBER is ranked #57 out of 80 stocks in the D-rated Technology – Services industry.
Workhorse Group Inc. (WKHS)
Technology company WKHS designs, manufactures and sells zero-emission commercial vehicles in the United States. In addition, the company designs and builds high-performance, battery-electric vehicles, including trucks and aircraft, as an American original equipment manufacturer.
On August 9, 2022, Roth Capital analyst Craig Irwin downgraded WKHS from Buy to Neutral.
WKHS’ sales decreased 99% year-over-year to $12,555 for the second quarter ended June 30, 2022. Its cash and cash equivalents came in at $140.06 million for the period ended June 30, 2022, compared to $201.65 million for the period ended December 31, 2021. Also, its total operating expenses came in at $18.06 million, up 97.8% year-over-year.
Street expects WKHS’ revenue to decline 2,280.8% year-over-year to $18.58 million in 2022. Its EPS is estimated to remain negative in 2022 and 2023. It missed EPS estimates in all four trailing quarters. Over the past year, the stock has lost 64.2% to close the last trading session at $2.69.
WKHS has an overall F grade, equating to a Strong Sell in our POWR Ratings system. Also, it has an F grade for Value and Stability and a D grade for Sentiment and Quality.
AppHarvest, Inc. (APPH)
APPH, an applied agricultural technology company, develops and operates indoor farms to grow non-GMO produce free of chemical pesticide residues. Its products include tomatoes, fruits, and vegetables, such as berries, peppers, cucumbers, and salad greens.
On August 1, 2022, APPH declared that it secured $50 million across two loans guaranteed by the United States Department of Agriculture through Greater Commercial Lending, a Greater Nevada Credit Union subsidiary.
APPH’s President, David Lee, said, “This funding agreement with the USDA allows us to continue to scale operations as we plan to bring the Somerset farm and two additional CEA (controlled environment agriculture) facilities online before the end of the year.”
However, the company’s liabilities are already rising with a receding cash balance, and such additional loans or borrowings might contribute to a deteriorating balance sheet.
For the second quarter ended June 30, 2022, APPH’s net sales came in at $4.36 million, up 38.9% year-over-year. However, its cash and cash equivalents came in at $50.94 million for the period ended June 30, 2022, compared to $150.75 million for the period ended December 31, 2021. Its long-term debt came in at $121.41 million, compared to $102.64 million for the same period.
APPH’s EPS is expected to fall 19.1% year-over-year to a negative $1.31 in 2022. Its EPS is expected to remain negative in 2023. Over the past year, the stock has lost 71.7% to close the last trading session at $1.89.
APPH’s POWR Ratings are consistent with this bleak outlook. The stock has an overall F rating, equating to a Strong Sell in our proprietary rating system. In addition, the stock has an F grade for Value, Stability, and Quality and a D grade for Growth.
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UBER shares were trading at $27.39 per share on Tuesday afternoon, up $0.50 (+1.86%). Year-to-date, UBER has declined -34.68%, versus a -22.58% rise in the benchmark S&P 500 index during the same period.
About the Author: Riddhima Chakraborty
Riddhima is a financial journalist with a passion for analyzing financial instruments. With a master's degree in economics, she helps investors make informed investment decisions through her insightful commentaries. More...
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