The stock market has been under pressure on concerns over a possible recession because the Fed intends to keep raising interest rates. Last week all major stock indexes closed in the red for the third straight week. A solid August jobs report failed to ease fears of aggressive interest rate hikes.
Moreover, cryptocurrencies have suffered a brutal sell-off this year. Bitcoin, the world's largest cryptocurrency by market cap, has declined significantly to hover below $19,000 as investors are in a risk-off mode.
Many economists warn that an economic downturn is looming. Economist Johns Hopkins predicts ‘a whopper’ of a recession next year. He said, “We will have a recession because we’ve had five months of zero M2 growth, money supply growth, and the Fed isn’t even looking at it.” In addition, nearly 46% of CFOs surveyed by Deloitte expect the North American economy to be in a recession by next year, while 39% expect stagflation.
Given the pessimistic outlook, it could be wise to avoid crypto-focused stocks Coinbase Global, Inc. (COIN) and Riot Blockchain, Inc. (RIOT), as they are not well-positioned to survive the market uncertainty.
Coinbase Global, Inc. (COIN)
COIN is a financial technology company that provides end-to-end economic infrastructure and technology. The company offers the primary financial account in the crypto economy for retailers, a marketplace with a pool of liquidity for transacting in crypto assets for institutions, and technology and services that enable ecosystem partners to build crypto-based applications and securely accept crypto-asset payments.
On July 21, 2022, the SEC announced insider trading charges against COIN’s former employee Ishan Wahi, accusing him of leaking information to his brother Nikhil Wahi and friend Sameer Ramani that COIN would list at least 25 crypto assets for trading on its platform.
COIN’s net revenue for the fiscal second quarter ended June 30, 2022, declined 63.7% year-over-year to $808.32 million. Its total operating expenses increased 36.9% year-over-year to $1.85 billion. The company’s net loss came in at $1.09 billion, compared to a net income of $1.61 billion in the year-ago period. Also, its loss per share came in at $4.98, compared to an EPS of $6.42 a year ago.
Analysts expect COIN’s EPS to remain negative for fiscal 2022. Its revenue for the quarter ending September 30, 2022, is expected to decline 49.7% year-over-year to $659.52 million. The stock has lost 76.2% over the past nine months and 75.1% year-to-date to close the last trading session at $62.78.
COIN’s weak fundamentals are reflected in its POWR Ratings. It has an overall F rating, equating 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.
It has an F grade for Growth, Value, Stability, and Sentiment and a D for Quality. It is ranked #153 out of 155 stocks in the F-rated Software - Application industry. Click here to see COIN’s rating for Momentum.
Riot Blockchain, Inc. (RIOT)
RIOT is involved in cryptocurrency mining and the overall blockchain system through various investments. It operates through Bitcoin Mining, Data Center Hosting, and Electrical Products and Engineering segments.
For the fiscal second quarter that ended June 30, 2022, RIOT’s total cost and expenses increased 1,012.1 year-over-year to $438.96 million. The company’s operating loss widened 7,045.9% from the year-ago period to $366.01 million. Also, its net loss came in at $366.33 million, compared to a net income of $19.34 million in the year-ago period.
Its adjusted EBITDA loss came in at $65.17 million compared to an adjusted EBITDA of $2.38 million a year ago. In addition, its adjusted loss per share came in at $0.50, compared to an adjusted EPS of $0.03 in the year-ago period.
For the quarter ending September 30, 2022, RIOT’s revenue is expected to decline 1.7% year-over-year to $63.72 million. Its EPS for the current quarter is expected to be negative. It has failed to surpass the consensus EPS estimates in three of the trailing four quarters. The stock has declined 77.3% over the past nine months and 71.3% year-to-date to close the last trading session at $6.40.
RIOT’s POWR Ratings reflect this bleak outlook. It has an overall F rating, equating to a Strong Sell in our proprietary rating system.
It has an F for Stability and Quality and a D for Value and Sentiment. Within the D-rated Technology - Services industry, it is ranked #80 out of 82 stocks. To see the other ratings of RIOT for Growth and Momentum, click here.
COIN shares were trading at $64.06 per share on Wednesday morning, up $1.28 (+2.04%). Year-to-date, COIN has declined -74.62%, versus a -16.42% rise in the benchmark S&P 500 index during the same period.
About the Author: Shweta Kumari
Shweta's profound interest in financial research and quantitative analysis led her to pursue a career as an investment analyst. She uses her knowledge to help retail investors make educated investment decisions.
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