With inflation still staying much higher than the Fed’s 2% target, the central bank will likely increase the benchmark rates by another 75 basis points this week. This raises the odds of the U.S. economy witnessing a recession in the coming months.
Moreover, the global economy is witnessing its steepest slowdown. Global consumer confidence has already suffered a much sharper decline compared to previous global recessions.
In an interview with Fox Business, Steve Forbes, the chairman and editor-in-chief of Forbes, crushed President Joe Biden’s optimism about the U.S. economy. Steve said the U.S. economy is “dead in the water,” and inflation is still biting on consumers’ wallets.
Given the backdrop, it could be wise to steer clear of fundamentally weak stocks Marvell Technology, Inc. (MRVL) and ContextLogic Inc. (WISH).
Marvell Technology, Inc. (MRVL)
MRVL designs, develops, and markets analog, mixed-signal, digital signal processing, embedded, and standalone integrated circuits. The company offers Ethernet solutions and storage products.
In terms of its forward P/E, MRVL is trading at 493.1x, substantially higher than the industry average of 21.56x. Its forward Price/Sales multiple of 5.50 is 118.8% higher than the industry average of 2.51.
For the fiscal second quarter ended July 30, MRVL’s total non-GAAP operating expenses increased 17.8% year-over-year to $431.60 million. Net cash used in investing activities rose 239.2% from the prior-year quarter to $129.90 million.
Its EPS is expected to come in at $0.59 for the fiscal third quarter ended October 2022. Analysts expect its revenue to amount to $1.56 billion for the same quarter.
The stock has declined 42.1% over the past year to close its last trading session at $39.68. It has fallen 54.7% year-to-date.
MRVL’s POWR Ratings reflect this bleak outlook. The stock has an overall D rating, equating 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.
The stock has a D grade for Stability and Quality. MRVL is ranked #80 within the 93-stock Semiconductor & Wireless Chip industry.
Click here to see the additional POWR Ratings for MRVL for Growth, Value, Momentum, and Sentiment.
ContextLogic Inc. (WISH)
WISH is an e-commerce company that operates an e-commerce platform, connecting users to merchants in Europe, North America, South America, and internationally. The company also provides marketplace and logistics services to its merchants.
In terms of its forward Price/Book, WISH is trading at 1.17x, 51.9% lower than the industry average of 2.43x. Its forward Price/Sales multiple of 0.73 is 11.6% lower than the industry average of 0.83.
WISH’s revenue decreased 79.6% year-over-year to $134 million in the second quarter ended June 30, 2022. Its gross profit declined 89.1% from the prior-year quarter to $42 million. The company reported an operating loss of $91 million, and its net loss came in at $90 million.
The consensus EPS estimate of negative $0.54 indicates a 67.5% year-over-year decline for the current fiscal year ending December 2022. Similarly, the consensus revenue estimate of $716.33 million represents a decline of 65.6% year-over-year in the current year.
WISH’s shares declined 84.7% over the past year to close its last trading session at $0.78. The stock has fallen 74.8% year-to-date.
WISH’s poor prospects are reflected in its POWR Ratings. The stock has an overall D rating, equating to Sell in our proprietary rating system.
WISH has an F grade for Stability and a D for Quality. It is ranked #52 among the 64 stocks in the F-rated Internet industry.
In addition to the POWR Ratings grades highlighted above, you can view WISH ratings for Growth, Momentum, Value, and Sentiment here.
MRVL shares were trading at $39.95 per share on Tuesday morning, up $0.27 (+0.68%). Year-to-date, MRVL has declined -54.14%, versus a -18.26% 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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