Concerns over multi-decade-high inflation and the Federal Reserve's aggressive stance are driving bearish sentiments in the stock market. All major stock market indexes have witnessed significant declines lately.
JPMorgan CEO Jamie Dimon said that equities may fall an "easy 20%" from present levels, depending on the economic outcome of the Fed's policies, and that the U.S. economy might face a recession by mid-2023.
The consumer discretionary sector is typically sensitive to economic conditions. Consumers tend to spend less on discretionary goods and services when the economy is in trouble.
Given the current macroeconomic uncertainties, we think it may be prudent to avoid fundamentally weak consumer discretionary stocks Roku Inc. (ROKU), The Beachbody Company Inc. (BODY), and Vinco Ventures Inc. (BBIG), which have slumped significantly in price over the past few months and could slide further given their poor growth attributes.
Roku Inc. (ROKU)
ROKU and its subsidiaries operate a TV streaming platform. The business is divided into two segments: Platform and Player. It sells its products and services through merchants and distributors in the United States, Canada, the United Kingdom, France, Mexico, Brazil, Chile, Peru, the North and South Americas, and Europe, as well as directly to clients through its website.
ROKU's total revenue increased 18.5% year-over-year to $764.41 million for the second quarter ended June 30, 2022. However, its operating loss came in at $110.51 million, compared to an operating income of $69.08 million in the prior-year quarter. The company reported a net loss of $112.32 million, compared to a net income of $73.47 million in the second quarter of 2021. Its loss per share amounted to $0.82.
Street expects the company’s EPS to decline 364.6% in the current quarter ending September 2022 and 717.6% in the next quarter ending December 2022. Also, its EPS is expected to remain negative in the current and next year. In addition, ROKU failed to surpass the consensus EPS estimates in two of the trailing four quarters.
The stock has slumped 83.8% over the past year and 77.3% year-to-date.
ROKU'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 are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
ROKU has been graded an F for Growth, Sentiment, and a D for Stability. Within the C-rated Consumer Goods industry, it is ranked #57 of 60 stocks.
To see additional POWR Ratings for Value, Quality, and Momentum for ROKU, click here.
The Beachbody Company Inc. (BODY)
The Beachbody Company, Inc. is a health and wellness company that offers fitness, nutrition, and stress-reduction programs. It operates in two segments: Beachbody and Other. The company had 2.5 million digital and 0.3 million nutritional subscriptions as of December 31, 2021.
BODY’s total revenue decreased 19.7% year-over-year to $179.14 million for the second quarter ended June 30, 2022. Its operating loss increased 47.8% from the year-ago value to $44.40 million. Its net loss surged 236.6% from the prior-year quarter to $41.87 million. Its loss per share grew 180% year-over-year to $0.14.
Its EPS is expected to decline 22.9% in the current year. Its revenue is projected to decrease 20.5% year-over-year to $694.55 million. The stock has declined 79.9% over the past year and 16.5% over the past month.
BODY's weak fundamentals are reflected in its POWR Ratings. The stock has an overall D rating, equating to a Sell in our proprietary rating system. The stock has a D grade for Growth and Quality. In the same industry, it is ranked #52.
In addition to the POWR Ratings grades I have just highlighted, you can see BODY ratings for Momentum, Value, Stability, and Sentiment here.
Vinco Ventures Inc. (BBIG)
BBIG develops and commercializes end-to-end consumer products in North America. It also offers Non-Fungible Token, a platform for artists and content owners to share their intellectual property, and digital marketing services for businesses and influencers.
On August 19, 2022, BBIG announced it received a notice from The Nasdaq Stock Market LLC's Listing Qualifications Department informing that it was not in compliance with Nasdaq's continued listing requirements under Nasdaq Listing Rule 5250(c)(1) due to its failure to file its Quarterly Report on Form 10-Q for the quarter ended June 30, 2022, with the United States Securities and Exchange Commission by the deadline.
BBIG's total net revenue increased 349.7% year-over-year to $11.53 million for the first quarter ended March 31, 2022. However, its net interest expense grew 76.7% from the prior-year quarter to $22.43 million. The company’s net loss surged 497% from the year-ago value to $372.95 million. Its loss per share amounted to $3.05.
The stock has declined 72.9% over the past year and 39.3% year-to-date.
BBIG’s poor prospects are also apparent in its POWR Ratings. The stock has an overall F rating, which equates to a Strong Sell in our proprietary rating system. It also has an F grade for Quality, Stability, and Value. BBIG is ranked last in the same industry.
Click here to see the additional POWR Ratings for BBIG (Momentum, Sentiment, and Growth).
ROKU shares were trading at $52.40 per share on Wednesday afternoon, up $0.70 (+1.35%). Year-to-date, ROKU has declined -77.04%, versus a -23.64% rise in the benchmark S&P 500 index during the same period.
About the Author: Pragya Pandey
Pragya is an equity research analyst and financial journalist with a passion for investing. In college she majored in finance and is currently pursuing the CFA program and is a Level II candidate.
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