The Fed announced its third consecutive 75-bps hike on Wednesday as it tries to tame the stubbornly high inflation. Additionally, Federal Reserve Chairman Jerome Powell expressed his apprehensions over looming recession fears. He said, "No one knows whether this process will lead to a recession or, if so, how significant that recession would be."
Benchmark indices continue to suffer heavy losses amid deteriorating investors' sentiments. The S&P 500 has lost 20.5% year-to-date. Moreover, Economist Nouriel Roubini sees further rate hikes in both November and December and a recession occurring at the end of 2022 that could last all of the following year.
He opined, "It's not going to be a short and shallow recession; it's going to be severe, long, and ugly." Also, he added, "Even in a plain vanilla recession, the S&P 500 can fall by 30%."
Given the uncertainties ahead, we think high-risk stocks Robinhood Markets, Inc. (HOOD), Norwegian Cruise Line Holdings Ltd. (NCLH), Crocs, Inc. (CROX), Dave & Buster's Entertainment, Inc. (PLAY), and Riot Blockchain, Inc. (RIOT) might be best avoided now.
Robinhood Markets, Inc. (HOOD)
HOOD operates a financial services platform in the United States. Its platform allows users to invest in stocks, exchange-traded funds (ETFs), options, gold, and cryptocurrencies.
On August 2, 2022, The New York State Department of Financial Services pressed a $30 million fine on the cryptocurrency trading unit of HOOD for alleged violations of anti-money-laundering and cybersecurity regulations. Similar cases are underway in court against HOOD, which might affect the company's near-term performance.
HOOD's transaction-based revenues came in at $202 million for the second quarter ended June 30, 2022, down 55.2% year-over-year. Its total net revenues came in at $318 million, down 43.7% year-over-year.
Also, its cash and cash equivalents came in at $5.96 billion for the period ended June 30, 2022, compared to $6.25 billion for the period ended December 31, 2021.
HOOD's revenue is expected to decrease 24.6% year-over-year to $1.37 billion in 2022. Its EPS is expected to remain negative in 2022 and 2023. Moreover, it missed EPS estimates in three of the four trailing quarters. The stock has lost 44.1% year-to-date to close the last trading session at $9.92. It has a 24-month beta of 1.78.
HOOD'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 different factors, each with its own weighting.
Also, the stock has an F grade for Quality and a D for Value, Stability, and Sentiment. Click here to access the additional POWR Ratings for HOOD (Growth and Momentum). HOOD is ranked #137 out of 149 stocks in the F-rated Software – Application industry.
Norwegian Cruise Line Holdings Ltd. (NCLH)
NCLH and its subsidiaries operate as a cruise company in North America, Europe, the Asia-Pacific, and internationally. The company operates the Norwegian Cruise Line, Oceania Cruises, and Regent Seven Seas Cruises brands.
NCLH's total revenue came in at $1.19 billion for the second quarter ended June 30, 2022, up 27,079.1% year-over-year. However, its total cruise operating expense came in at $1.07 billion, up 329.8% year-over-year. Its long-term debt came in at $12.24 billion for the period ended June 30, 2022, compared to $11.57 billion for the period ended December 31, 2021.
Analysts expect NCLH's EPS to fall 165.1% per annum for the next five years. It missed EPS estimates in all the trailing four quarters. The stock has lost 29.7% year-to-date to close the last trading session at $14.58. It has a beta of 2.40.
NCLH has an overall F grade, equating to a Strong Sell in our POWR Ratings system. Also, it has an F grade for Stability and Sentiment and a D for Value and Quality.
Click here to access the NCLH rating for Growth and Momentum. It is ranked last among the four F-rated Travel – Cruises industry stocks.
Crocs, Inc. (CROX)
CROX and its subsidiaries design, develop, manufacture, market, and distribute casual lifestyle footwear and accessories for men, women, and children. The company's shoes are sold in more than 90 countries worldwide.
For the second quarter ended June 30, 2022, CROX's revenues came in at $964.58 million, up 50.5% year-over-year. However, its net income came in at $160.31 million, down 49.7% year-over-year, while its EPS came in at $2.58, down 47.7% year-over-year.
CROX's EPS is expected to decline marginally year-over-year to $2.14 for the quarter ending December 2022. The stock has lost 41.7% year-to-date to close the last trading session at $74.78. Also, CROX has a beta of 2.00.
CROX's POWR Ratings are consistent with this bleak outlook. The stock has an overall D rating, equating to a Sell in our proprietary rating system. In addition, the stock has an F grade for Stability and a D for Sentiment.
We also have graded CROX for Growth, Value, Momentum, and Quality. Click here to access all of CROX's ratings. It is ranked #54 of 67 stocks in the Fashion & Luxury industry.
Dave & Buster's Entertainment, Inc. (PLAY)
PLAY owns and operates entertainment and dining venues for adults and families in North America. It owns and operates 200 venues in North America and has 148 branded stores in 41 states.
On September 14, 2022, PLAY announced its partnership with Abdul Mohsen Al Hokair Holding Group, tourism, and development company, to co-develop its market across West Asian Markets like the United Arab Emirates and Egypt. However, it might take some time for PLAY to benefit from this expansionary policy.
PLAY's total revenue came in at $468.36 million for the second quarter ended July 31, 2022, up 24% year-over-year. However, its operating income came in at $56.47 million, down 28.7% year-over-year. Moreover, its EBITDA came in at $95.09 million, down 16.6% year-over-year.
PLAY's EPS is estimated to decrease 61.9% year-over-year to $0.08 for the quarter ending October 2022. Over the past month, the stock has lost 17.5% to close the last trading session at $34.88. The stock has a beta of 1.73.
PLAY has an overall grade of D, translating to Sell in our proprietary rating system. Also, the stock has an F grade for Sentiment and a D grade for Growth and Stability.
Click here to access the additional POWR Ratings for PLAY (Value, Momentum, and Quality). It is ranked #39 of 44 stocks in the Restaurants industry.
Riot Blockchain, Inc. (RIOT)
RIOT and its subsidiaries focus on bitcoin mining operations in North America. It operates through Bitcoin Mining; Data Center Hosting; and Electrical Products and Engineering segments.
RIOT's net loss came in at $366.33 million for the second quarter ended June 30, 2022, compared to an income of $19.34 million in the year-ago period. Its adjusted EBITDA came in at a negative $65.17 million, compared to $2.39 million in the previous period. In addition, its adjusted loss per share came in at $0.50, compared to an EPS of $0.03 in the prior-year period.
Street expects RIOT's EPS to fall 2,987.5% year-over-year to negative $2.47 in 2022. It missed EPS estimates in three of the four trailing quarters. RIOT has lost 71.5% year-to-date to close the last trading session at $6.37. It has a beta of 4.57.
RIOT has an overall F rating, equating to a Strong Sell in our POWR Ratings system. It has an F grade for Stability, Sentiment, and Quality and a D grade for Value. Click here for additional RIOT ratings (Growth and Momentum). RIOT is ranked #79 out of 81 stocks in the D-rated Technology – Services industry.
HOOD shares were trading at $10.45 per share on Thursday morning, up $0.53 (+5.34%). Year-to-date, HOOD has declined -41.16%, versus a -20.04% 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.
5 High-Risk Stocks to Avoid in September StockNews.com
