The Federal Reserve hiked its policy interest rate by 75 basis points last week, the third such increase in a row, and signaled further hikes this year. Moreover, according to the latest Bureau of Economic Analysis GDP estimate issued Thursday, the U.S. economy shrunk by 0.6% in the second quarter, heightening concerns about an impending recession following two consecutive quarters of negative growth.
The major market indices have experienced massive declines lately. According to market strategists, stock market declines have wiped out more than $9 trillion in value from American households.
Also, according to Mark Zandi, chief economist at Moody's Analytics, the losses could lower real GDP growth by almost 0.2 percentage points in the coming year.
So, in the face of rising uncertainties, we think it could be wise to avoid fundamentally weak stocks like Uber Technologies Inc. (UBER), Lucid Group Inc. (LCID), and Opendoor Technologies Inc. (OPEN).
Uber Technologies Inc. (UBER)
UBER creates and manages proprietary technology solutions across three business segments: Mobility; Delivery; and Freight. It connects customers with independent rideshare operators, restaurants, and food delivery service providers for meal preparation and delivery.
This month, UBER has been involved in yet another cybersecurity debacle. A hacker hacked an Uber employee's Slack account and obtained access to a portion of the company's Amazon and Google-hosted cloud infrastructure, announcing and informing the public that "Uber has experienced a data breach."
During the second quarter ended June 30, 2022, UBER’s revenue increased 105.5% year-over-year to $8.07 billion. However, its operating expenses increased 71.7% from the year-ago value to $8.79 billion. Its operating loss came in at $713 million. The company reported a net loss of $2.60 billion, compared to a net income of $1.14 billion in the prior-year quarter. Its loss per share amounted to $1.33.
Analysts expect UBER’s EPS to decline 367% in fiscal 2022 and remain negative. The stock has declined 39% over the past year and 33.1% year-to-date.
UBER's POWR Ratings are consistent with this bleak outlook. The stock's overall D rating translates 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.
UBER has been graded a D for Stability, Value, and Quality. Within the D-rated Technology – Services industry, it is ranked #56 of 79 stocks. To see additional POWR Ratings for Growth, Sentiment, and Momentum for UBER, click here.
Lucid Group Inc. (LCID)
LCID designs, develops, produces, and sells electric vehicles (EV), EV powertrains, and battery systems in-house, utilizing its own equipment and facilities. The company sells its products through its geographically diverse retail and service sites, as well as through direct-to-consumer and retail sales.
LCID’s revenue increased significantly year-over-year to $97.34 million for the second quarter ended June 30, 2022. However, its operating loss increased 124.7% from the year-ago value to $559.19 million. Its net loss surged 112.2% from the prior-year quarter to $555.27 million. Its adjusted EBITDA loss grew 89.9% year-over-year to $414.08 million.
Its EPS is expected to decline 52.4% in the current quarter ending September 2022 and 47.6% in the next quarter ending December 2022. The stock has declined 37.9% over the past year and 60% year-to-date.
LCID's weak fundamentals are reflected in its POWR Ratings. The stock has an overall F rating, equating to a Strong Sell in our proprietary rating system. It also has an F grade for Stability, Value, and Quality. In the D-rated Auto & Vehicle Manufacturers industry, it is ranked #53 of 64 stocks.
In addition to the POWR Ratings grades I have just highlighted, you can see LCID ratings for Momentum, Growth, and Sentiment here.
Opendoor Technologies Inc. (OPEN)
OPEN operates a residential real estate digital platform that allows consumers to buy and sell their property online. Its product and service offerings include Opendoor Complete, Sell to Opendoor, Buy with Opendoor, Opendoor Home Loans, and Title and Escrow.
OPEN's revenue increased 254% year-over-year to $4.2 billion for the second quarter ended June 30, 2022. However, the company reported a net loss of $54 million, while its net cash used in operating activities came in at $343 million for the six months ended June 30.
Street expects its EPS to decline 444.4% in the current quarter and 48.3% in the next quarter ending December 2022. The stock has declined 83% over the past year and 24.8% over the past month.
OPEN’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 Sentiment. OPEN is ranked #38 of 40 stocks in the D-rated Real Estate Services industry. Click here to see the additional POWR Ratings for OPEN. (Momentum, Value, and Growth).
UBER shares were trading at $26.48 per share on Thursday afternoon, down $1.56 (-5.56%). Year-to-date, UBER has declined -36.85%, versus a -22.61% 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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