Investors’ sentiments plunged amid bank failures and recession worries. Given the macroeconomic headwinds, I think CRISPR Therapeutics AG (CRSP), First Majestic Silver Corp. (AG), and McEwen Mining Inc. (MUX) might be best avoided, and in this article, I’ll explain why.
The weak retail sales data for March is another cause for concern in the US economy. Sales fell more than expected in March, with consumers particularly holding back on big-ticket item purchases.
This decline in retail sales has extended the pattern seen in February and may indicate that consumer spending, a significant driver of economic growth, is slowing down.
However, despite economic uncertainties, major banks of the country exceeded expectations, aided by a rise in interest rates. Additionally, the banks provided optimistic forecasts for future net interest income.
Also, JPMorgan Chase CEO Jamie Dimon suggests that investors and businesses should prepare for interest rates to remain high for an extended period, longer than what the market is currently expecting.
Additionally, Chicago Fed President Austan Goolsbee stated that a mild recession is a plausible outcome as the Federal Reserve’s sharp rate increases over the past year start to have a complete impact on the economy. He emphasized that the central bank should exercise caution in its policy decisions.
Furthermore, investors are growing increasingly worried about the US debt ceiling standoff, with a looming deadline that could result in a default this summer.
The demand for US Treasury bills has decreased, and the cost of credit default swaps on US government debt has reached its highest point since 2012, indicating that investors are attempting to protect themselves against potential debt default.
Take a detailed look at the stocks mentioned above:
CRISPR Therapeutics AG (CRSP)
Headquartered in Zug, Switzerland. CRPS is a gene editing company that focuses on developing gene-based medicines for serious diseases. The company has a portfolio of therapeutic programs across a range of disease areas, including hemoglobinopathies, oncology, regenerative medicine, and rare diseases.
CRSP’s forward Price/Sales of 28.50x is 582.6% higher than the industry average of 4.17x. Its forward EV/Sales multiple of 16.83 is 366.2% higher than the industry average of 3.61.
CRSP’s revenues declined 99.9% from the prior year to $1.20 million in the fiscal year that ended December 31, 2022. Its comprehensive loss and loss per share rose 277.3% and 277.9% year-over-year to $660.76 million and $8.36, respectively.
Analysts expect CRSP’s EPS to amount to a negative $1.64 in the recent quarter (ended March 2023) and a negative $6.82 in the current fiscal year 2023. CRSP has a poor earnings surprise history, as it has missed the consensus revenue estimates in each of the trailing four quarters.
CRSP has declined 38.6% over the past nine months to close the last trading session at $50.31. It has a 60-month beta of 1.70.
CRSP’s POWR Ratings reflect its grim outlook. The stock has an overall D rating, which equates 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.
It has an F grade for Stability and a D for Value, Quality, and Momentum. The stock is ranked #350 of 381 stocks in the F-rated Biotech industry.
In addition to the POWR Ratings stated above, CRSP’s rating for Growth and Sentiment can be seen here.
First Majestic Silver Corp. (AG)
Headquartered in Vancouver, Canada, AG engages in acquiring, exploring, developing, and producing mineral properties, focusing on silver and gold production in Mexico and the United States.
AG’s forward EV/Sales of 3.24x is 117.2% higher than the industry average of 1.49x. Its forward EV/EBITDA multiple of 17.41 is 129.9% higher than the industry average of 7.57. Its forward P/S of 3.14x is 184.6% higher than the 1.10x industry average.
On March 30, 2023, AG announced that it had completed the sale of its La Guitarra Silver Mine to Sierra Madre Gold & Silver Ltd. for CDN$44.9 million ($33.50 million).
Moreover, on March 20, AG announced that it had temporarily halted its activities at Jerritt Canyon due to high costs, even though it accounted for 21% of the company’s revenue in 2022.
Despite the company’s efforts to increase underground mining rates since acquiring the Jerritt Canyon Gold Mine in Nevada, mining rates have remained below expectations, and cash costs per ounce have been higher than anticipated.
During the fiscal fourth quarter that ended December 31, 2022, AG’s revenues declined 27.7% year-over-year to $148.19 million. The company’s mine operating loss stood at $13.27 million compared to mine operating earnings of $40.36 million in the year-ago quarter.
Also, its net loss rose 323.5% year-over-year to $16.82 million, while loss per share came in at $0.06, indicating an increase of 200% year-over-year.
Street expects AG’s EPS and revenue for the fiscal year ending December 2023 to come in at negative $0.09 and $646.02 million, respectively.
Over the past year, the stock has declined 48.2% to close its last trading session at $7.37. It has fallen 16% over the past three months. Its 24-month beta is 1.77.
It’s no surprise that AG has an overall rating of F, which translates to a Strong Sell in our POWR Ratings system.
The stock also has an F grade for Growth and Sentiment and a D for Value, Momentum, Stability, and Quality. It is ranked last in the 11-stock F-rated Miners – Silver industry.
To access additional AG information, click here.
McEwen Mining Inc. (MUX)
Headquartered in Toronto, Canada, MUX engages in the exploration, development, production, and sale of gold and silver deposits in the United States, Canada, Mexico, and Argentina. The company also explores copper deposits.
MUX’s forward EV/Sales multiple of 3.36 is 125.3% higher than the industry average of 1.49x. Its forward P/S of 2.97x is 169.3% higher than the industry average of 1.10x.
MUX’s revenue from gold and silver sales decreased 19.1% year-over-year to $110.42 million during the fiscal year that ended December 31, 2022. Its operating loss came in at $95.44 million, increasing 48.5% year-over-year.
The company’s net loss and net loss per share grew 43% and 36.8% from the prior year to $81.08 million and $1.71.
MUX’s EPS is expected to remain negative this year. Also, the company missed the consensus revenue estimates in each of the trailing four quarters, which is disappointing.
The stock declined 2.2% intraday, closing the last trading session at $9.55. It has a 24-month beta of 1.63.
MUX’s weak fundamentals are reflected in its POWR Ratings. The stock has an overall D rating, which equates to a Sell in our proprietary rating system.
It also has an F grade in Quality and a D in Momentum, Stability, Sentiment, and Value. ONDS is ranked #35 among 41 stocks in the Miners - Diversified industry.
For Growth grade of MUX, click here.
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CRSP shares rose $0.16 (+0.32%) in premarket trading Monday. Year-to-date, CRSP has gained 24.13%, versus a 8.37% 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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