The stock market is expected to remain under pressure due to the increased odds of a recession. The Consumer Price Index (CPI) index rose 9.1% year-over-year in June, hitting a new high in more than 40 years.
The red-hot inflation data is expected to make the Federal Reserve even more aggressive in raising the benchmark interest rates. The Fed officials have signaled lifting interest rates by 75 basis points in its meeting next week.
While the stock market has witnessed some relief rallies over the past few days on investors’ optimism over better-than-expected tech earnings, according to Fairlead Strategies’ Katie Stockton, the current market rally will likely fade, and investors should be prepared for the bear market to continue.
The technical analyst added that while the S&P 500 and Nasdaq reclaimed their 50-day moving averages, longer-term indicators are still in negative territory.
So, we think shares of fundamentally weak companies Plug Power Inc. (PLUG), Rivian Automotive, Inc. (RIVN), and Lucid Group, Inc. (LCID) are best avoided now. These stocks are rated “Strong Sell” in our proprietary rating system.
Plug Power Inc. (PLUG)
PLUG offers hydrogen fuel cell solutions for the power markets in North America and Europe. It is focused on proton exchange membrane (PEM) fuel cell technologies, green hydrogen generation, storage, and dispensing infrastructure. The company provides products such as GenDrive, GenFuel, GenCare, ProGen engines, GenSure, and GenKey.
On April 29, PLUG and Olin Corporation (OLN), a leading vertically integrated Chlor alkali producer and marketer, signed a memorandum of understanding (MOU) to create a joint venture (JV) to produce and market green hydrogen to support growing fuel cell demand. The JV is expected to be operational in 2023. So, it might take a while to realize gains from this strategic partnership.
In the fiscal 2022 first quarter ended March 31, 2022, PLUG’s operating expenses increased 187.5% year-over-year to $103.81 million. Its operating loss widened 188.2% year-over-year to $139.16 million. In addition, the company’s net loss and net loss per share came in at $156.90 million and $0.27, worsening 157.6% and 125% year-over-year, respectively.
Analysts expect PLUG’s loss per share to widen 12.2% from the prior-year period to $0.20 for the fiscal 2022 second quarter (ended June 2022). Furthermore, the consensus loss per share estimate for the current year (ending December 2022) is expected to come in at $0.78.
The stock has declined 36.4% year-to-date and 34.7% over the past year to close the last trading session at $18.32.
PLUG’s POWR Ratings are consistent with this bleak outlook. The company has an overall rating of F, which translates to Strong Sell in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
PLUG has a grade of F for Quality and Stability. It has a grade of D for Growth, Value, and Sentiment. Within the Industrial - Equipment industry, it is ranked #90 of 91 stocks. To see PLUG’s POWR Rating for Momentum, click here.
Rivian Automotive, Inc. (RIVN)
RIVN designs, develops, manufactures, markets, and sells electric vehicles (EVs) and accessories in the United States. The company offers pickup trucks and sports utility vehicles. RIVN also provides Rivian Commercial Vehicle in collaboration with Amazon.com for an electric Delivery Van. It sells its products directly to customers in the consumer and commercial markets.
In the fiscal 2022 first quarter ended March 31, 2022, RIVN’s gross profit stood at negative $502 million. Its operating expenses increased 162.7% year-over-year to $1.08 billion. The company’s loss from operations widened 285.1% from the year-ago value to $1.58 billion.
In addition, RIVN’s net loss came in at $1.59 billion, worsening 284.8% year-over-year. Its net loss per share attributable to Class A and Class B common stockholders amounted to $1.77. As of March 31, 2022, its cash and cash equivalents stood at $16.43 million versus $18.13 million as of December 31, 2021.
Analysts expect RIVN's loss per share for the fiscal 2022 second quarter (ended June 2022) and fiscal year 2022 (ending December 2022) to come in at $1.63 and $6.37, respectively. Also, Street expects the company’s EPS to decline 31.7% per annum over the next five years.
The stock has plunged 66.8% year-to-date and 66.1% over the past year to close the last trading session at $34.13.
RIVN’s POWR Ratings reflect this bleak outlook. The stock's overall F rating translates to a Strong Sell in our proprietary rating system.
RIVN has an F grade for Stability, Value, and Quality and a D for Growth and Sentiment. Within the Auto & Vehicle Manufacturers industry, it is ranked #63 of 65 stocks. Click here to see additional POWR Ratings (Momentum) for RIVN.
Lucid Group, Inc. (LCID)
LCID is a technology and automotive company. It designs, builds, and sells EVs, powertrains, and battery systems. The company sells its products at its own geographically distributed retail and service locations and through direct-to-consumer online and retail sales. It operates more than twenty retail studios in the United States.
In June, LCID entered into a Credit Agreement on June 9. Bank of America Corp. (BAC) is the transaction's administrative agent and Swingline lender. The revolving credit facility will provide an initial committed amount of up to $1 billion and has a five-year term, maturing on June 9, 2027. The credit facility is expected to increase the company’s loan and interest.
LCID's total cost and expenses increased 151.8% year-over-year to $512.08 million in the fiscal 2022 first quarter ended March 31, 2022. Its loss from operations worsened 100% from the prior-year period to $597.53 million. The company’s net loss and loss per share attributable to common stockholders amounted to $81.29 million and $0.05, respectively.
In addition, the company’s cash outflows from operating activities and investing activities stood at $494.65 million and $185.08 million, up 126.2% and 95.3% year-over-year, respectively.
The $0.34 consensus loss per share estimate for the fiscal 2022 third quarter (ending September 2022) represents a 61.9% widening from the same period in 2021. In addition, analysts expect LCID's EPS to decline 69.4% per annum over the next five years.
LCID’s shares have declined 43.1% over the past six months and 47.5% year-to-date to close the last trading session at $21.48.
LCID's POWR Ratings reflect its poor prospects. The stock has an overall F rating, equating to a Strong Sell in our proprietary rating system.
LCID has a grade of F for Value, Quality, and Stability and D for Sentiment. Within the Auto & Vehicle Manufacturers industry, it is ranked #51 of 65 stocks. To see LCID's POWR Ratings for Growth and Momentum, click here.
PLUG shares were trading at $17.66 per share on Friday afternoon, down $0.66 (-3.60%). Year-to-date, PLUG has declined -37.44%, versus a -16.51% rise in the benchmark S&P 500 index during the same period.
About the Author: Mangeet Kaur Bouns
Mangeet’s keen interest in the stock market led her to become an investment researcher and financial journalist. Using her fundamental approach to analyzing stocks, Mangeet’s looks to help retail investors understand the underlying factors before making investment decisions.
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