The central bank announced its fourth straight interest rate hike of three-quarters of a percentage point, continuing its aggressive and unprecedented campaign to get inflation under control, a move that threatens to contract the U.S. economic growth.
Despite the rise of the unemployment rate in October, Bank of America Corp. (BAC) analysts said the U.S. economy is "clearly overheating," particularly the labor market, as wage growth remains robust. Additionally, analysts see the economy shrinking at an annualized pace of 1.5% in the first three quarters of 2023.
Moreover, Harvard economist Kenneth Rogoff has issued a dire warning about the U.S. economy. He said, "I worry that not only we're going to get a mild recession, I think the chances that we've got a significant recession are really pretty high.”
Amid such recessionary concerns, fundamentally weak stocks Plug Power Inc. (PLUG) and Peloton Interactive, Inc. (PTON) might be best avoided.
Plug Power Inc. (PLUG)
PLUG is a leading provider of comprehensive hydrogen fuel cell (HFC) turnkey solutions. The company offers end-to-end clean hydrogen and zero-emissions fuel cell solutions for supply chain and logistics applications, on-road electric vehicles, the stationary power market, and more.
On October 19, PLUG and Olin Corporation (OLN) announced the launch of a joint venture to begin the construction of a 15-ton-per-day hydrogen plant in St. Gabriel, Louisiana. However, there might still be some time before realizing gains from the joint venture.
During the second quarter that ended June 30, 2022, PLUG’s total operating expenses increased 131.9% year-over-year to $114.44 million. The company’s operating loss rose 63.9% from the year-ago value to $146.91 million. Its net loss increased 73.9% year-over-year to $173.30 million, while its loss per share grew 66.7% year-over-year to $0.30.
Street estimates PLUG’s EPS to decline 18.2% year-over-year to negative 0.97 for the fiscal year ending December 2022. Moreover, the company has failed to surpass the consensus revenue estimates in three of the trailing four quarters.
Over the past year, PLUG has plunged 61.5% to close the last trading session at $14.79. The stock has declined 29.9% over the past month.
PLUG’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 assess stocks by 118 different factors, each with its own weighting.
It has an F grade for Stability, Sentiment, and Quality and a D for Growth and Value. It is ranked #89 of 90 stocks in the Industrial – Equipment industry.
To see PLUG’s POWR Rating for Momentum, click here.
Peloton Interactive, Inc. (PTON)
PTON operates an interactive fitness platform internationally. The company offers connected fitness products with a touchscreen that streams live and on-demand classes, connected fitness subscriptions for various household users, and access to various live and on-demand classes.
On November 2, it was reported that national investment fraud lawyers KlaymanToskes were investigating full-service brokerage firms on behalf of current and former PTON employees and investors who sustained losses from holding concentrated or margined positions, as shares fell from an all-time high of $162.72 on December 24, 2020.
PTON’s total revenue declined 23.4% year over year to $616.50 million for the fiscal first quarter ended September 30. Its gross profit came in at $217.20 million, down 17.4% year-over-year. Its net loss rose 208.6% year-over-year to $408.50 million. The company’s net loss per share attributable to common stockholders amounted to $1.20.
PTON’s revenue is expected to decrease 37.1% year-over-year to $713.83 million in the second fiscal quarter ending December 2022. Its EPS is expected to be negative $0.64 for the same quarter.
The stock has lost 83.1% over the past year to close the last trading session at $9.39. It has declined 73.7% year-to-date.
As evident from its poor fundamentals, PTON has an overall F rating, which equates to a Strong Sell in our proprietary rating system.
It also has an F grade for Sentiment and a D for Value and Quality. PTON is ranked #58 out of 60 stocks in the Consumer Goods industry.
Click here to access the additional ratings for PTON (Growth, Stability, and Momentum).
PLUG shares were trading at $14.78 per share on Monday afternoon, down $0.01 (-0.07%). Year-to-date, PLUG has declined -47.64%, versus a -19.47% rise in the benchmark S&P 500 index during the same period.
About the Author: Kritika Sarmah
Her interest in risky instruments and passion for writing made Kritika an analyst and financial journalist. She earned her bachelor's degree in commerce and is currently pursuing the CFA program. With her fundamental approach, she aims to help investors identify untapped investment opportunities.
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