October’s inflation data came in lower than expected, showing signs that it might be finally cooling off. However, inflation remains way above the Fed’s long-term target of 2%.
The recently released minutes from the Fed’s policy meeting held earlier this month showed that the central bank would shift from hiking the interest rates by 75 basis points at its policy meeting next month. The majority of Fed officials believe the current pace of rate hikes might slow down.
However, the odds of a recession are still high as the final level of interest rates is expected to be higher than previously predicted. Economists surveyed in a Bloomberg survey believe there is a 65% chance of a U.S. recession in the next twelve months. They also think the Fed’s benchmark rate will peak at 5% next year and fall to 3% by the end of 2024.
Given this backdrop, it could be wise to avoid fundamentally weak stocks Advanced Micro Devices, Inc. (AMD), DraftKings Inc. (DKNG), SoFi Technologies, Inc. (SOFI), ContextLogic Inc. (WISH), and Faraday Future Intelligent Electric Inc. (FFIE).
Advanced Micro Devices, Inc. (AMD)
AMD is a global semiconductor company. Its segments include Computing and Graphics, Enterprise, Embedded, and Semi-Custom. The Computing and Graphics segment includes desktop and notebook microprocessors, accelerated processing units, chipsets, GPUs, data centers, etc.
The Enterprise, Embedded, and Semi-Custom segment includes server and embedded processors, semi-custom system-on-chip (SoC) products, etc.
AMD’s non-GAAP operating expenses increased 46.9% year-over-year to $1.52 billion for the third quarter ended September 24, 2022. Its non-GAAP operating margin came in at 23%, compared to 24% in the year-ago period. In addition, its non-GAAP EPS declined 8.2% year-over-year to $0.67. Also, its total current liabilities increased 57.8% to $6.69 billion, compared to $4.24 billion for the fiscal year ended December 25, 2021.
Analysts expect AMD’s EPS for the quarter ending December 24, 2022, to decline 26.6% year-over-year to $0.67. Its revenue for the quarter ending March 24, 2023, is expected to decline 4.2% year-over-year to $5.64 billion. Over the past year, the stock has declined 52.4% to close the last trading session at $75.14.
AMD’s weak fundamentals are reflected in its POWR Ratings. The stock 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 a D for Growth and Quality. It is ranked #91 out of 93 stocks in the Semiconductor & Wireless Chip industry. Click here to see the other ratings of AMD for Value, Momentum, and Sentiment.
DraftKings Inc. (DKNG)
DKNG is a digital sports entertainment and gaming company. It provides multi-channel sports betting and gaming technologies, powering sports and gaming entertainment for operators in 17 countries. In addition to DraftKings, the company operates Golden Nugget Online Gaming, an iGaming product and gaming brand, in three states.
DKNG’s adjusted EBITDA loss narrowed 15.7% year-over-year to $264.21 million for the third quarter ended September 30, 2022. Its total adjusted operating expenses increased 45.6% year-over-year to $766 million. Also, its total current assets declined 20.3% to $2.19 billion, compared to $2.75 billion for the fiscal year ended December 31, 2021. In addition, its net loss narrowed 17.3% year-over-year to $450.49 million.
Analysts expect DKNG’s EPS for the quarter ending December 31, 2022, to remain negative. Over the past year, the stock has declined 57.4% to close the last trading session at $15.14.
DKNG’s weak prospects are reflected in its POWR Ratings. It has an overall F rating, equating to a Strong Sell in our proprietary rating system.
It has an F grade for Stability and a D for Value, Sentiment, and Quality. It is ranked last out of #27 stocks in the D-rated Entertainment – Casinos/Gambling industry. Click here to see the other ratings of DKNG for Growth and Momentum.
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 74.9% to close the last trading session at $4.60.
SOFI’s weak fundamentals are reflected in its POWR Ratings. 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 Quality and a D for Value and Momentum. It is ranked #98 out of 103 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 379.7% year-over-year to $0.15. Its revenue for the current quarter is expected to decline 47.4% year-over-year to $152.02 million. Over the past year, the stock has declined 82.9% to close the last trading session at $0.68.
WISH’s POWR Ratings reflect this 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 Stability and a D for Growth and Quality. Within the F-rated Internet industry, it is ranked #55 out of 58 stocks. To see the other ratings of WISH for Value, Momentum, and Sentiment, click here.
Faraday Future Intelligent Electric Inc. (FFIE)
FFIE engages in the design, development, manufacture, engineering, sale, and distribution of electric vehicles and related products in the United States and internationally. It aims to break the boundaries between the Internet, IT, creative, and auto industries with product and service offerings that integrate new energy, AI, Internet, and sharing models.
In August, several employees of FFIE called on the board and shareholders of the company to remove Executive Chairperson Susan Swenson. In a letter dated August 23, the employees alleged that Swenson had attempted to push the company into bankruptcy and restructuring.
For the fiscal third quarter ended September 30, 2022, FFIE’s total assets declined 40.4% to $540.68 million, compared to $907.43 million for the fiscal year ended December 31, 2021. Its net loss came in at $103.37 million, while its loss per share came in at $0.31.
For the nine months ended September 30, 2022, the company’s net cash used in operating activities increased 49.3% from the year-ago period to $355.11 million, and its total operating expenses increased 57.7% year-over-year to $367.07 million.
FFIE’s EPS for the quarter ended December 31, 2022, is expected to remain negative. Over the past year, the stock has fallen 95% to close the last trading session at $0.32.
FFIE’s weak fundamentals are reflected in its POWR Ratings. The company has an overall rating of F, which equates to a Strong Sell in our proprietary rating system. Again, it is ranked #60 in the D-rated Auto & Vehicle Manufacturers industry. In addition, it has an F grade for Value, Stability, and Quality and a D for Sentiment.
Click here to see the ratings of FFIE for Growth and Momentum.
AMD shares were trading at $74.17 per share on Monday morning, down $0.97 (-1.29%). Year-to-date, AMD has declined -48.46%, versus a -15.07% 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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