Due to the Fed’s aggressive monetary policy stance, the stock market witnessed a challenging 2022. The central bank’s aggressive rate hikes put immense pressure on high-growth tech stocks. The tech-heavy Nasdaq Composite has declined 30.7% over the past year.
The Fed’s seven rate hikes to bring inflation under control showed results towards the end of last year as inflation came below estimates in October and November. However, minutes from the Fed’s December policy meeting indicate that interest rates will keep rising until more progress is made on bringing inflation to its desired level.
This is expected to put further pressure on the stock market with fears of the economy tipping into a recession. Moreover, several tech companies' recent cost-cutting initiatives and lay-offs indicate more challenging days ahead.
Given the current uncertain macroeconomic environment, it could be wise to avoid fundamentally weak Internet stocks Shopify Inc. (SHOP) and DoorDash, Inc. (DASH).
Shopify Inc. (SHOP)
Headquartered in Ottawa, Canada, SHOP, a commerce company, provides a commerce platform and services worldwide.
SHOP’s adjusted net loss for the third quarter ended September 30, 2022, came in at $30.04 million, compared to an adjusted net income of $102.82 million in the prior-year period. Its adjusted operating loss came in at $45.08 million, compared to an adjusted operating income of $140.16 million in the year-ago period.
Its adjusted net loss per share attributable to shareholders came in at $0.02, compared to an adjusted EPS of $0.08 in the prior-year quarter.
Analysts expect SHOP’s EPS for the quarter ended December 31, 2022, to be negative. Over the past nine months, the stock has fallen 48.9% to close the last trading session at $35.95.
SHOP’s bleak outlook is reflected in its POWR Ratings. The stock has an overall rating of F, equating to a Strong Sell in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
Within the F-rated Internet - Services industry, it is ranked #27 out of 28 stocks. It has a D grade for Value, Momentum, Stability, and Quality.
To see the additional ratings of SHOP for Growth and Sentiment, click here.
DoorDash, Inc. (DASH)
DASH operates a logistics platform that connects merchants, consumers, and dashers worldwide. It operates the DoorDash marketplace, DoorDash Drive and DoorDash Storefront.
For the fiscal third quarter ended September 30, 2022, DASH’s loss from operations widened 208% year-over-year to $308 million. The company’s net loss attributable to DASH common stockholders widened 192.1% year-over-year to $295 million. Moreover, its net loss per share attributable to DASH common shareholders widened 156.7% year-over-year to $0.77.
DASH’s EPS for the quarter ending December 31, 2022, is expected to remain negative. The stock has fallen 60.1% over the past nine months to close the last trading session at $47.13.
DASH’s weak fundamentals are reflected in its POWR Ratings. The company has an overall rating of D, which equates to a Sell in our proprietary rating system. It is ranked #25 within the Internet - Services industry. In addition, it has a D grade for Growth, Stability, and Sentiment.
We have also given DASH grades for Value, Momentum, and Quality. Get all DASH ratings here.
SHOP shares were trading at $37.13 per share on Friday afternoon, up $1.18 (+3.28%). Year-to-date, SHOP has gained 6.97%, versus a 1.36% rise in the benchmark S&P 500 index during the same period.
About the Author: Malaika Alphonsus
Malaika's passion for writing and interest in financial markets led her to pursue a career in investment research. With a degree in Economics and Psychology, she intends to assist investors in making informed investment decisions.
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