Supply chain disruptions and record-high inflation are already hurting the tech industry’s growth. And now it is reeling from souring investor sentiment on their expectation of aggressive interest rate hikes this year. While some large tech companies have reported impressive fourth-quarter earnings, the industry is projected to suffer significant losses in the near term.
While the continuing digitization and hybrid working trends are expected to drive the industry’s growth and help big players perform steadily in the near term, the overall industry might experience deteriorating financials in the near future.
We think fundamentally weak tech stocks SentinelOne, Inc. (S), Marqeta, Inc. (MQ), C3.ai, Inc. (AI), and Velo3D, Inc. (VLD) may not be able to stay afloat in a rising interest rate environment. So, these stocks are best avoided now.
SentinelOne, Inc. (S)
S operates as a cybersecurity provider in the United States. Its Singularity Platform mainly delivers artificial intelligence-powered autonomous threat prevention, detection, and response capabilities. S is headquartered in Mountain View, Calif.
SentinelOne’s revenue came in at $56.02 million for its fiscal year 2022 third quarter, ended Oct. 31, 2021, up 128.1% year-over-year. However, the company’s net loss increased 127.5% year-over-year to $68.59 million. Its loss from operations also increased 127% year-over-year to $67.37 million. And its total liabilities were $302.05 million for the period ended Oct. 31, 2021, compared to $219.96 million for the period ending Jan. 31, 2021.
The company’s EPS is expected to remain negative in its fiscal 2022 and 2023. And its EPS is estimated to decrease 18.6% per annum for the next five years.
Over the past month, the stock has declined 3.3% in price to close yesterday’s trading session at $41.26.
SentinelOne’s POWR Ratings reflect its poor prospects. It has an overall grade of F, which indicates a Strong Sell. The POWR Ratings assess stocks by 118 distinct factors, each with its own weighting.
Also, the stock has an F grade for Stability and a D grade for Growth, Value, Momentum, and Quality. Click here to access the additional POWR Ratings for S. The stock is ranked #26 of 28 stocks in the D-Rated Software - Security industry.
Click here to checkout our Cybersecurity Industry Report for 2022
Marqeta, Inc. (MQ)
MQ operates a cloud-based open application programming interface platform that delivers card issuing and transaction processing services to developers, technical product managers, and visionary entrepreneurs. MQ is based in Oakland, Calif.
MQ’s net revenue was $131.52 million for the third quarter ended Sept. 30, 2021, up 56% year-over-year. However, its net loss increased 271.8% year-over-year to $45.73 million. Its adjusted EBITDA came in at a $4.94 million loss, compared to earnings of $686,000 in the year-ago period. Also, its total liabilities were $209.8 million for the period ended Sept. 30, 2021, compared to $169.52 million for the period ended Dec. 31, 2020.
Analysts expect MQ’s EPS to remain negative in 2022. Over the past month, the stock has declined 23.9% in price to close yesterday’s trading session at $10.43.
MQ’s POWR Ratings reflect its poor prospects. The stock has an overall F grade, which equates to a Strong Sell in our POWR Ratings system. Also, it has an F grade for Growth and Value and a D grade for Stability and Quality.
We have also rated it for Momentum and Sentiment. Click here to access all the MQ ratings. It is ranked #56 of 58 stocks in the D-Rated Software - Business industry.
Click here to check out our Software Industry Report for 2022
C3.ai, Inc. (AI)
AI in Redwood City, Calif., operates as an enterprise artificial intelligence (AI) software company in North America, Europe, the Middle East, Africa, Asia Pacific, and internationally. The company aims to accelerate digital transformation.
For its fiscal year 2022 second quarter, ended Oct. 31, 2021, AI’s total revenue came in at $58.26 million, up 40.9% year-over-year. However, its net loss increased 279.7% year-over-year to $56.74 million, while its loss per share increased 41% year-over-year to $0.55. Furthermore, its total liabilities came in at $138.36 million for the period ended Oct. 31, 2021, versus $135.30 million for the period ended April 30, 2021.
Analysts expect AI’s EPS to remain negative in fiscal 2022 and 2023. Furthermore, its EPS is expected to decline by 32.9% per annum over the next five years. Over the past month, the stock has retreated 20.2% in price to close yesterday’s trading session at $22.34.
AI’s POWR Ratings are consistent with this bleak outlook. The stock has an overall F rating, which equates to a Strong Sell in our proprietary rating system. In addition, the stock has a D grade for Growth, Value, Momentum, Stability, and Quality.
We also have graded AI for Sentiment. Click here to access all of AI’s ratings. It is ranked last in the F-Rated Software - SAAS industry.
Velo3D, Inc. (VLD)
VLD produces metal additive three-dimensional printers that enable the production of components for space rockets, jet engines, fuel delivery systems, and other high-value metal parts. VLD is based in Campbell, Calif.
VLD’s revenues came in at $8.71 million for the third quarter, ended Sept. 30, 2021, up 283.2% year-over-year. However, its non-GAAP net loss increased 119.9% year-over-year to $14.6 million, and its non-GAAP loss per share increased 76.2% year-over-year to $0.74. The company’s total liabilities came in at $201.41 million for the period ended Sept. 30, 2021, compared to $16.81 million for the period ended Dec. 31, 2020.
VLD’s EPS is estimated to remain negative in 2022. Also, the stock has declined 36.1% in price over the past year to close yesterday’s session at $7.30.
VLD’s POWR Ratings reflect its poor prospects. It has an overall grade of F, which indicates a Strong Sell. Also, the stock has an F grade for Value and Quality and a D grade for Growth, Stability, and Sentiment.
Click here to access the additional POWR Ratings for VLD (Momentum). VLD is ranked last in the F-Rated Technology - 3D Printing industry.
S shares rose $0.44 (+1.07%) in premarket trading Friday. Year-to-date, S has declined -18.28%, versus a -7.98% 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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