The stock market has experienced a turbulent year due to macroeconomic and geopolitical headwinds. The economy has been facing its worst inflation in 41 years, with the June consumer price index accelerating 9.1% from the year-ago period, exceeding the Dow Jones 8.8% estimate.
In addition, the Federal Reserve’s aggressive policy tightening to control the surging inflation has made investors concerned about the economy tipping into a recession. According to a Bloomberg survey of economists, the median probability of a recession over the next 12 months is 47.5%.
“Summer is a great time to go camping, but we aren’t out of the woods yet,” analysts at Bank of America said in a note Sunday morning, warning of more pain ahead for equities.
The technology sector has been hit the hardest, causing well-known tech stocks Snap Inc. (SNAP), Etsy, Inc. (ETSY), Amazon.com, Inc. (AMZN), and Carvana Co. (CVNA) to deliver poor returns. Since the macroeconomic environment will likely remain challenging, these stocks are expected to slide further due to weakness in their businesses. Thus, these stocks are best avoided now.
Snap Inc. (SNAP)
SNAP is a camera company offering an application known as Snapchat that connects people worldwide through short videos and images. Its advertising products include Snap Ads and augmented reality (AR) Ads.
On August 02, 2022, SNAP announced the pricing of upsized $1.3 billion convertible senior notes offering due 2028 in a private placement to qualified institutional buyers. This is expected to increase the company’s total debt and interest burden.
During the second quarter, which ended June 30, 2022, SNAP’s operating loss widened 108.3% year-over-year to $400.94 million. Its net loss widened 178.3% year-over-year to $422.07 million, while its adjusted EBITDA decreased 93.9% year-over-year to $7.19 million. Also, its non-GAAP net loss per share came in at $0.02, compared to an EPS of $0.10 from the same period last year.
The consensus loss per share estimate of $0.03 for the current quarter ending September 30, 2022, indicates a 117.6% decline year-over-year. Over the past year, shares of SNAP have declined 85.9% to close the last trading session at $10.32.
SNAP’s weak fundamentals are reflected in its POWR Ratings. It has an overall rating of D, equating 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.
It has an F grade for Stability and a D for Growth, Momentum, Sentiment, and Quality. It is ranked #59 out of 65 stocks in the F-rated Internet industry. Click here to see SNAP’s rating for Value.
Etsy, Inc. (ETSY)
ETSY operates two-sided online marketplaces connecting people, buyers, and sellers worldwide. The company operates through four segments: Etsy, Reverb, Depop, and Elo7.
For the fiscal second quarter ended June 30, 2022, ETSY’s total operating expenses increased 17.3% year-over-year to $341.15 million. The company’s income from operations fell 18.6% from the year-ago value to $72.56 million, while its net income declined 25.6% year-over-year to $73.12 million. Also, its EPS decreased 25% year-over-year to $0.51.
For the quarter ending September 30, 2022, ETSY’s EPS is expected to decline 12.4% year-over-year to $0.79. The stock has lost 54.7% over the past nine months to close the last trading session at $108.50.
ETSY’s POWR Ratings reflect its bleak prospects. It has an overall rating of D, equating to a Sell in our proprietary rating system.
It has a D grade for Value, Stability, and Sentiment. Within the same industry, it is ranked #41. To see the other ratings of ETSY for Growth, Momentum, and Quality, click here.
Amazon.com, Inc. (AMZN)
AMZN offers a variety of products and services through its platforms. Its products include merchandise and content that it purchases for resale from vendors and those offered by third-party sellers. In addition, it provides electronic devices such as Kindle, Fire tablet and Fire TV, Echo, and Ring. It also develops and produces media content that it publishes on its membership only Amazon Prime.
AMZN’s total operating expenses increased 11.9% year-over-year to $117.91 billion for the second quarter ended June 30, 2022. The company’s net cash from operating activities declined 29.5% year-over-year to $8.96 billion. Its net loss came in at $2.02 billion, compared to a net income of $7.77 billion in the year-ago period.
Analysts expect AMZN’s EPS for the current quarter ending September 30, 2022, to decline 30.3% year-over-year to $0.21. It failed to surpass consensus EPS estimates in three of the trailing four quarters. Over the past nine months, the stock has lost 17.5% to close the last trading session at $139.50.
AMZN’s weak fundamentals are reflected in its POWR Ratings. It has a D grade for Value and is ranked #28 in the same industry. Click here to see AMZN’s Growth, Momentum, Stability, Sentiment, and Quality rating.
Carvana Co. (CVNA)
CVNA operates an e-commerce platform for buying and selling used cars in the United States. Its platform permits customers to research and identify a vehicle, inspect, obtain financing and warranty coverage and purchase it. It also enables them to schedule delivery or pick-up from their desktop or mobile devices.
CVNA’s gross profit for the fiscal first quarter ended March 31, 2022, declined 11.8% year-over-year to $298 million. The company’s net loss attributable widened by 622.2% year-over-year to $260 million. Its adjusted EBITDA loss increased 883.9% from the year-ago value to $364 million. Also, its net loss per share widened 528.3% year-over-year to $2.89.
Analysts expect CVNA’s EPS for fiscal 2022 and 2023 to remain negative. It failed to surpass Street EPS estimates in three of the trailing four quarters. Over the past year, the stock has lost 89.5% to close the last trading session at $34.90
CVNA’s POWR Ratings are consistent with its bleak outlook. It has an overall rating of F, which translates to a Strong Sell in our proprietary rating system.
It has an F grade for Growth, Stability, Sentiment, and Quality. It is ranked last in the Internet industry. Click here to see the additional ratings of CVNA for Value and Momentum.
SNAP shares were trading at $10.17 per share on Thursday morning, down $0.15 (-1.45%). Year-to-date, SNAP has declined -78.38%, versus a -12.31% 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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