The stock market has flashed more red flags than green this year, as inflation hit a 40-year high. The Fed’s stringent monetary tightening has been burdening individuals and businesses with increased borrowing costs, thereby increasing the odds of the economy slipping into a recession.
With choppy waters ahead, the International Monetary Fund and World Bank warned of increasing risk of global recession next year. JPMorgan’s analysts forecast a ‘mild recession’ and expect the S&P 500 to test its 2022 lows during the first quarter of next year.
Many analysts foresee a volatile path ahead for the market and expect stocks to fall as corporate earnings could decline before rebounding in the second half of 2023.
Given such adverse economic and market conditions, it could be wise to avoid fundamentally weak stocks Affirm Holdings, Inc. (AFRM), Cano Health, Inc. (CANO), and Faraday Future Intelligent Electric Inc. (FFIE) before the end of the year.
Affirm Holdings, Inc. (AFRM)
AFRM provides digital and mobile commerce platforms by enabling a technology-driven payments network through partnerships with banks. The company's platform allows consumers to select their repayment options while the loans are funded and issued by its bank partner. Its platform has three elements: a point-of-sale payment solution, merchant commerce solutions, and consumer-focused applications.
AFRM’s total operating expenses increased 49.1% year-over-year to $649.09 million in the first quarter ended September 30, 2022. The company’s operating loss widened 73.1% from the year-ago value to $287.47 million. Its net loss narrowed 18.1% year-over-year to $251.27 million. Also, its loss per share narrowed 23.9% year-over-year to $0.86.
Analysts expect AFRM’s EPS for fiscal 2022 to remain negative. Its EPS is expected to decrease 34.7% per annum over the next five years. The stock has lost 90.9% over the past year and 88.4% year-to-date to close the last trading session at $11.62.
AFRM’s weak fundamentals are reflected in its POWR Ratings. It has an overall F rating, equating 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.
It has an F grade for Stability and Sentiment and a D for Growth, Momentum, and Quality. It is ranked #74 out of 77 stocks in the Technology - Services industry. Click here to see AFRM’s rating for Value.
Cano Health, Inc. (CANO)
CANO operates as a primary care medical services provider in the United States and Puerto Rico. The company owns and operates medical centers enabled by CanoPanorama, a health management technology-powered platform.
For the fiscal third quarter that ended September 30, 2022, CANO’s total operating expenses increased 30.8% year-over-year to $696.47 million. Its loss from operations narrowed 6.4% from the year-ago value to $31.44 million, while its net loss widened 72.7% year-over-year to $112.01 million. Also, its net loss per share came in at $0.23, widening 64.3% from the prior year period.
Analysts expect CANO’s EPS for fiscal 2022 to decrease 25.7% year-over-year to $0.11 for fiscal 2022. Over the past year, the stock has lost 86.3% to close the last trading session at $1.36.
CANO’s POWR Ratings reflect this bleak outlook. It has an overall rating of D, which translates to Sell in our proprietary rating system.
It has an F grade for Stability, Sentiment, and Quality and a D for Momentum. It is ranked #11 out of 12 stocks in the F-rated Medical – Hospitals industry. Click here to see the other ratings of CANO for Growth and Value.
Faraday Future Intelligent Electric Inc. (FFIE)
FFIE is engaged in the design, development, manufacturing, engineering, sale, and distribution of electric vehicles in the United States and internationally.
In the fiscal third quarter ended September 30, 2022, FFIE’s loss from operations narrowed 56.6% year-over-year to $80.61 million. The company’s net loss and net loss per share narrowed 66% and 70.7% from the year-ago value to $103.38 million and $0.31, respectively. In addition, its total assets declined 40.4% to $540.68 million, compared to $907.43 million for the fiscal year ended December 31, 2021.
Analysts expect FFIE's loss per share for fiscal 2022 to remain negative. It has missed the consensus EPS estimates in three of the trailing four quarters. The stock has declined 95.3% over the past year to close the last trading session at $0.26.
FFIE's POWR Ratings reflect this bleak outlook. The stock has an overall rating of F, which translates to a Strong Sell in our proprietary rating system. It has an F grade for Value, Stability, and Quality and a D for Sentiment. It is ranked #60 of 64 stocks in the D-rated Auto & Vehicle Manufacturers industry.
Click here to see the other ratings of FFIE for Growth and Momentum.
AFRM shares were trading at $11.45 per share on Friday afternoon, down $0.17 (-1.46%). Year-to-date, AFRM has declined -88.61%, versus a -15.66% rise in the benchmark S&P 500 index during the same period.
About the Author: Shweta Kumari
Shweta's profound interest in financial research and quantitative analysis led her to pursue a career as an investment analyst. She uses her knowledge to help retail investors make educated investment decisions.
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