Although the July inflation report showed signs of slowing price increases, other macroeconomic issues, including the rising geopolitical concerns and recession fears, are expected to keep the market under pressure. The CBOE Volatility Index gained 19% year-to-date.
Moreover, the Fed is expected to declare another sharp rate hike in September, raising recession fears. St. Louis Federal Reserve President James Bullard expects approximately a 150 bps rate hike in 2022.
According to a new survey by Stifel Financial, 18% of executives opined that the U.S. economy is already in a recession, while 79% believe a recession is due within the next 18 months.
Given the uncertain backdrop, fundamentally weak stocks DraftKings Inc. (DKNG), Carvana Co. (CVNA), and Flux Power Holdings, Inc. (FLUX) might be best avoided now.
DraftKings Inc. (DKNG)
DKNG operates a digital sports entertainment and gaming company. It offers multi-channel sports betting and gaming technologies, powering sports and gaming entertainment for operators in 17 countries.
DKNG’s total revenue came in at $466.19 million for the second quarter ended June 30, 2022, up 56.6% year-over-year. However, its B2B segment’s revenue came in at $11.47 million, down 58.2% year-over-year. Also, its total adjusted EBITDA came in at a negative $118.13 million, compared to a negative $95.30 million in the year-ago period.
DKNG’s EPS is expected to remain negative in 2022 and 2023. Moreover, its EPS is estimated to decline 6.8% per annum for the next five years. Over the past year, the stock has lost 62.4% to close the last trading session at $19.58.
DKNG’s POWR Ratings reflect its poor prospects. It has an overall grade of D, which indicates a Sell. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
Also, the stock has an F grade for Stability and a D for Value and Quality. Click here to access the additional POWR Ratings for DKNG (Growth, Momentum, and Sentiment). DKNG is ranked #28 out of 29 stocks in the D-rated Entertainment - Casinos/Gambling industry.
Carvana Co. (CVNA)
CVNA and its subsidiaries operate an e-commerce platform for buying and selling used cars in the United States. The company aims to change the way people buy and sell cars and offers ‘as-soon-as-next-day’ delivery to customers in over 300 U.S. markets.
On August 9, 2022, JPMorgan Chase & Co. downgraded CVNA from neutral to underweight.
CVNA’s net sales and operating revenues came in at $3.88 billion for the second quarter ended June 30, 2022, up 16.4% year-over-year. However, its gross profit came in at $396 million, down 28.3% year-over-year. Its net loss came in at $238 million, compared to a net income of $22 million in the prior-year period, while its loss per share came in at $2.35, compared to an EPS of $0.26 in the previous period.
Street expects CVNA’s EPS to decline 375.5% year-over-year to a negative $7.75 in 2022. Its EPS is estimated to remain negative in 2023. Also, its EPS is expected to decrease 210.5% per annum for the next five years. In addition, CVNA missed EPS estimates in each of the trailing four quarters.
Over the past year, the stock has lost 86.4% to close the last trading session at $47.86.
CVNA has an overall F grade, equating to a Strong Sell in our POWR Ratings system. Also, it has an F grade for Growth, Stability, Sentiment, and Quality.
Click here to access the CVNA ratings for Value and Momentum. It is ranked last among 65 stocks in the F-rated Internet industry.
Flux Power Holdings, Inc. (FLUX)
Through its subsidiary, Flux Power, Inc., FLUX designs, develops, manufactures, and sells lithium-ion energy storage solutions for lift trucks, airport ground support equipment, and other industrial and commercial applications in the United States.
For the third quarter ended March 31, 2022, FLUX’s revenues came in at $13.18 million, up 89.2% year-over-year. However, its net loss came in at $3.75 million, up 117.3% year-over-year, while its loss per share came in at $0.23, up 64.3% year-over-year. Its operating loss increased 24.6% year-over-year to $3.70 million.
Analysts expect FLUX’s EPS to fall 2.8% year-over-year to a negative $1.11 in 2022. Its EPS is estimated to remain negative in 2023. FLUX missed consensus EPS estimates in three of the trailing four quarters. Over the past year, the stock has lost 62.6% to close the last trading session at $2.98.
FLUX’s POWR Ratings are consistent with this bleak outlook. The stock has an overall F rating, equating to a Strong Sell in our proprietary rating system. In addition, the stock has an F grade for Quality and a D for Growth, Momentum, and Stability.
We also have graded FLUX for Value and Sentiment. Click here to access all of FLUX’s ratings. It is ranked #80 out of 92 stocks in the Industrial – Equipment industry.
DKNG shares fell $0.58 (-2.96%) in premarket trading Friday. Year-to-date, DKNG has declined -31.38%, versus a -10.06% rise in the benchmark S&P 500 index during the same period.
About the Author: Riddhima Chakraborty
Riddhima is a financial journalist with a passion for analyzing financial instruments. With a master's degree in economics, she helps investors make informed investment decisions through her insightful commentaries.
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