The COVID-19 pandemic led to overrating of several stocks that played a crucial role during those uncertain times, like on-demand delivery, telehealth, fintech solutions, and e-commerce. While these stocks were major gainers last year, they have fallen significantly this year due to uncertain macroeconomic conditions.
The Federal Reserve’s aggressive interest rate hikes to tame the elevated inflation has kept the stock market under pressure. The central bank has raised the benchmark interest rate six times this year, the most recent being a 75 basis points increase earlier this month.
The consumer price index (CPI) rose 7.7% year-over-year and 0.4% sequentially in October, coming below analyst estimates of a 7.9% year-over-year and a 0.5% sequential increase. The Fed Chair Jerome Powell indicated that the decision to slow the rate increase pace would be taken at the next Fed meeting.
However, Powell has cautioned that the final level of interest rates would be higher than expected. Many economists fear that the economy will slip into a recession next year. This is expected to keep the stock market under pressure in the upcoming months.
Therefore, it could be wise to avoid once-overhyped stocks DoorDash, Inc. (DASH), Teladoc Health, Inc. (TDOC), SoFi Technologies, Inc. (SOFI), and ContextLogic Inc. (WISH), as these stocks could witness further declines due to their weak fundamentals.
DoorDash, Inc. (DASH)
DASH operates a logistics platform that connects merchants, consumers, and dashers in the United States and internationally. It operates the DoorDash marketplace, DoorDash Drive, and DoorDash Storefront.
In July, DASH shut down its robotic salad-maker arm, Chowbotics, and laid off 35 workers. The idea is based on the company’s inability to profit during the pandemic when revenues skyrocketed.
DASH’s total costs and expenses increased 46.1% year-over-year to $2 billion for the third quarter ended September 30, 2022. Its loss from operations increased 208% year-over-year to $308 million. The company’s net loss attributable to DASH widened 192.1% year-over-year to $295 million.
In addition, its loss per share widened 156.6% year-over-year to $0.77. For nine months ended September 30, 2022, its net cash provided by operating activities declined 34.5% year-over-year to $344 million. Its adjusted gross margin was 47.4%, compared to 55.6% in the year-ago period.
Analysts expect DASH’s loss per share for the quarter ending December 31, 2022, to widen 44.4% year-over-year to $0.65. Over the past year, the stock has declined 72.3% to close the last trading session at $62.99.
DASH’s POWR Ratings reflect its weak fundamentals. The stock has an overall rating of D, equating to a Sell in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
It has a D grade for Growth, Stability, and Sentiment. It is ranked #25 out of 29 stocks in the F-rated Internet – Services industry. Click here to see the other ratings of DASH for Value, Momentum, and Quality.
Teladoc Health, Inc. (TDOC)
TDOC operates in the health services segment and provides virtual access to care. The company’s portfolio of services and solutions includes various medical subspecialties, from non-urgent, episodic needs to chronic, complicated medical conditions.
For the fiscal third quarter ended September 30, 2022, TDOC’s adjusted EBITDA declined 24% year-over-year to $51.21 million. Its loss from operations widened 18.4% year-over-year to $71.73 million. Also, its net loss came in at $73.48 million and a loss per share of $0.45. In addition, its total expenses increased 17.3% year-over-year to $683.13 million.
For the quarter ending December 31, 2022, TDOC’s EPS is expected to remain negative. Over the past year, the stock has declined 75.4% to close the last trading session at $33.31.
TDOC’s poor prospects are also apparent in its POWR Ratings. The stock has an overall F rating, equating to a Strong Sell in our proprietary rating system.
It has a D grade for Growth, Value, Stability, and Sentiment. It is ranked #77 out of 79 stocks within the D-rated Medical – Services industry. To see the other ratings of TDOC for Momentum and Stability, click here.
SoFi Technologies, Inc. (SOFI)
SOFI is a digital financial services company. It operates through the lending, financial services, and technology platform segments. The company’s lending segment offers student loans and personal and home loans.
The financial services segment provides cash management and investment services through SoFi Money, SoFi Invest, SoFi Credit Card, and SoFi Relay. Its technology platform segment offers the benefits of Galileo and Apex.
SOFI’s non-interest expense increased 65.1% year-over-year to $498.43 million for the third quarter that ended September 30, 2022. The company’s net loss widened 147% year-over-year to $74.21 million. Its loss per share widened 80% year-over-year to $0.09. Its total liabilities stood at $10.33 billion at the end of the third quarter, compared to $4.48 billion as of December 31, 2021.
Analysts expect SOFI’s EPS for the quarter ending December 31, 2022, to remain negative. Over the past year, the stock has declined 74.1% to close the last trading session at $5.95.
SOFI’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.
It has an F grade for Stability and a D for Value, Momentum, and Quality. It is ranked #104 out of 108 stocks in the F-rated Financial Services (Enterprise) industry. Click here to see the other ratings of SOFI for Growth and Sentiment.
ContextLogic Inc. (WISH)
WISH is a mobile electronic commerce company. The company provides a discovery-based shopping platform that connects merchants’ products to users based on user preferences. Its personalized product feed enables the users to discover products to purchase by scrolling through its mobile application and browsing.
For the fiscal third quarter ended September 30, 2022, WISH’s revenue declined 66% year-over-year to $125 million. Its adjusted EBITDA loss widened 216.7% year-over-year to $95 million. The company’s total assets declined 29% to $911 million, compared to $1.28 billion for the fiscal year ended December 31, 2021.
Its gross profit declined 79.6% year-over-year to $34 million. Also, its net loss widened 93.7% year-over-year to $124 million. In addition, its loss per share widened 80% year-over-year to $0.18.
For the quarter ending December 31, 2022, WISH’s loss per share is expected to widen 378.5% year-over-year to $0.15. Its revenue for the current quarter is expected to decline 48% year-over-year to $150.40 million. Over the past year, the stock has declined 84.9% to close the last trading session at $0.83.
WISH’s POWR Ratings reflect its poor prospects. It has an overall rating of D, which translates to a Sell in our proprietary rating system.
It has an F grade for Stability and a D for Growth. Within the F-rated Internet industry, it is ranked #47 out of 58 stocks. To see the other ratings of WISH for Value, Momentum, Sentiment, and Quality, click here.
DASH shares fell $0.89 (-1.41%) in premarket trading Monday. Year-to-date, DASH has declined -57.70%, versus a -15.12% rise in the benchmark S&P 500 index during the same period.
About the Author: Dipanjan Banchur
Since he was in grade school, Dipanjan was interested in the stock market. This led to him obtaining a master’s degree in Finance and Accounting. Currently, as an investment analyst and financial journalist, Dipanjan has a strong interest in reading and analyzing emerging trends in financial markets.
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