The tech-heavy Nasdaq Composite has gained 8% over the past month. However, according to Gargi Chaudhuri, BlackRock’s Head of iShares Investment Strategy Americas, such gains appear transitory.
Moreover, rate hikes are expected to continue this year, which might keep the industry under pressure. Federal Reserve Governor Lisa Cook said, “We are determined to bring inflation down to our target. So, I think we are not done yet with raising interest rates.”
In addition, mass tech layoffs in the industry is making investors anxious. Also, Forrester estimates the U.S.’s tech spend growth to be merely 5.4% in 2023, down from 7.4% growth in 2022.
Given the grim outlook, it could be wise to avoid fundamentally weak tech stocks Snowflake Inc. (SNOW), Affirm Holdings, Inc. (AFRM), PAR Technology Corporation (PAR), and Riot Platforms, Inc. (RIOT).
Snowflake Inc. (SNOW)
SNOW provides a cloud-based data platform in the United States and internationally.
SNOW’s forward EV/Sales of 23.15x is 693.5% higher than the industry average of 2.92x. Its forward Price/Sales of 25.41x is 772.7% higher than the industry average of 2.91x.
Its trailing-12-month negative EBITDA and net income margins of 37.90% and 38.79% are significantly lower than the industry averages of 11.14% and 2.98%.
SNOW’s net loss came in at $200.94 million for the quarter that ended October 31, 2022, up 29.8% year-over-year. Its loss per share increased 23.5% year-over-year to $0.63. Moreover, its cash and cash equivalents came in at $819 million for the period ended October 31, 2022, compared to $1.09 billion for the period ended January 31, 2022.
SNOW’s EPS is expected to decline 66.7% year-over-year to $0.04 for the yet-to-be-reported quarter ending January 2023. Over the past year, the stock has lost 41.3% to close the last trading session at $171.02.
SNOW’s POWR Ratings reflect its poor prospects. It has an overall grade of D, which equates to a Sell. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
Also, the stock has a D grade for Value, Momentum, Stability, and Quality. SNOW is ranked #73 out of 80 stocks in the Technology – Services industry. Click here to access the additional POWR Ratings for SNOW (Growth and Sentiment).
Affirm Holdings, Inc. (AFRM)
AFRM operates a platform for digital and mobile-first commerce in the United States, Canada, and internationally.
AFRM’s forward EV/Sales of 4.70x is 61.1% higher than the industry average of 2.92x. Its forward Price/Cash Flow of 23.81x is 31.2% higher than the industry average of 18.15x.
The stock’s trailing-12-month negative EBITDA and net income margins of 66.21% and 55.05% compare with the industry averages of 11.14% and 2.98%.
AFRM’s operating loss came in at $359.53 million for the quarter that ended December 31, 2022, up 83.2% year-over-year. Its net loss increased 101.9% year-over-year to $322.44 million, while its loss per share came in at $1.10, up 93% year-over-year.
Analysts expect AFRM’s EPS to decline 352.6% year-over-year to negative $0.86 for the quarter ending March 2023. Its EPS is expected to remain negative in 2023 and 2024. Moreover, it missed EPS estimates in three of four trailing quarters. Over the past year, the stock has lost 70% to close the last trading session at $13.10.
AFRM’s overall F grade equates to a Strong Sell in our proprietary rating system. Also, the stock has an F grade for Sentiment and a D for Growth, Stability, and Quality. It is ranked #78 in the same industry.
Get the additional POWR Ratings for AFRM (Value and Momentum) here.
PAR Technology Corporation (PAR)
PAR and its subsidiaries offer technology solutions worldwide to the restaurant and retail industries. The company operates in two segments, Restaurant/Retail and Government.
PAR’s forward EV/Sales of 3.79x is 28.8% higher than the industry average of 2.95x, while its forward Price/Sales of 3.04x is 3% higher than the industry average of 2.96x.
Its trailing-12-month negative EBITDA and net income margins of 15.83% and 23.98% are lower than the industry averages of 11.22% and 2.98%.
PAR’s operating loss came in at $18.44 million for the third quarter that ended September 30, 2022, up 30.7% year-over-year. Also, its total operating expenses increased 23.3% year-over-year to $39.85 million.
Street expects PAR’s EPS to fall 25% year-over-year to negative $0.45 for the yet-to-be-reported quarter ending December 2022. Its EPS is expected to remain negative in 2023. Over the past year the stock has lost 7.1% to close the last trading session at $38.93.
PAR’s POWR Ratings are consistent with this bleak outlook. The stock has an overall F rating, equating to a Strong Sell in our proprietary rating system. In addition, the stock has an F grade for Quality and a D for Value and Sentiment. It is ranked #75 in the same industry.
We also have graded PAR for Growth, Momentum, and Stability. Click here to access all of PAR’s ratings.
Riot Platforms, 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 forward Price/Sales of 3.60x is 21.7% higher than the industry average of 2.96x.
Its trailing-12-month negative EBITDA and net income margins of 38.17% and 128.74% are compare with the industry averages of 11.22% and 2.98%.
RIOT’s total revenue came in at $46.29 million for the quarter that ended September 30, 2022, down 28.6% year-over-year. Its net loss came in at $36.57 million, up 138.3% year-over-year. Moreover, its loss per share came in at $0.24, representing a 50% year-over-year increase.
The consensus revenue estimate $55.31 million for the yet-to-be-reported quarter ended December 2022, reflects a 39.1% year-over-year decrease. Its EPS is expected to decline substantially year-over-year to a negative $2.79 for the yet-to-be-reported fiscal year 2022.
It missed EPS estimates in three of four trailing quarters. Over the past year the stock has lost 67.1% to close the last trading session at $5.90.
RIOT’s overall F rating equates to a Strong Sell in our POWR Ratings system.
It has an F grade for Stability, Sentiment, and Quality and a D for Value. It is ranked #79 in the same industry. To see additional RIOT ratings for Growth and Momentum, click here.
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SNOW shares fell $0.18 (-0.11%) in premarket trading Wednesday. Year-to-date, SNOW has gained 19.49%, versus a 7.61% 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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