Inflation cooled significantly in November, as the Consumer Price Index (CPI) rose 7.1% annually, down from 7.7% in October and much better than economists’ expectations of 7.3%. Despite the moderation in inflation, the Fed indicated raising interest rates through next year, with the key rate reaching roughly 5.1% or more. The Fed’s persistent hawkish stance could lead to the economy tipping into a recession.
Furthermore, the policymakers downgraded their outlook for economic growth in 2023 from the 1.2% forecasted in September to 0.5%. Consumers also pulled back on spending last month, with retail sales dropping 0.6%, even worse than the Dow Jones estimate for a 0.3% decline.
With further monetary tightening in store and other unfavorable economic data, recession odds continue to rise. According to the latest Bloomberg monthly survey of economists, the probability of an economic downturn next year stands at 70%, up from 65% in November and more than double what was estimated six months ago.
Amid the uncertain economic backdrop, it could be wise to avoid fundamentally weak stocks Lucid Group, Inc. (LCID), Ginkgo Bioworks Holdings, Inc. (DNA), and Bed Bath & Beyond Inc. (BBBY). These stocks are rated F (Strong Sell) in our POWR Ratings system.
Lucid Group, Inc. (LCID)
LCID is a technology and automotive company that develops electric vehicle (EV) technologies. It designs, engineers, and builds electric vehicles, EV powertrains, and battery systems. The company operates more than twenty retail studios in the United States.
On December 13, LCID and Panasonic Energy Co., Ltd., a Panasonic Group company (PCRFY), entered into multi-year agreements to supply batteries for LCID’s award-winning luxury electric vehicle, Lucid Air, and its upcoming Gravity SUV.
Peter Rawlinson, LCID’s CEO and CTO said, “This agreement will help us meet the growing demand for lithium-ion batteries as we continue to ramp production of the full Lucid Air line-up in 2023 and expect to begin production of our Gravity SUV in 2024.” It might take a while to realize gains from the deal.
In the third quarter of fiscal 2022 ended September 30, DNA’s total cost and expenses increased 77.6% year-over-year to $882.98 million. The company’s loss from operations widened 38.3% year-over-year to $687.52 million. Its adjusted EBITDA loss worsened 125.7% from the prior-year period to $552.90 million.
In addition, the company’s net loss widened 1.1% year-over-year to $530.10 million, and the net loss per share attributable to common stockholders stood at $0.40. Also, its non-GAAP free cash outflow was $859.53 million, up 123.6% year-over-year.
Analysts expect its loss per share for the current quarter ending December 31, 2022, to widen 43.7% year-over-year to $0.43. The company is expected to report a loss per share of $1.28 for the next fiscal year (ending December 2023), worsening by 1.3% year-over-year. Also, it failed to surpass the consensus EPS estimate in three of the trailing four quarters.
The stock has declined 82.5% year-to-date to close the last trading session at $7.18.
LCID weak prospects are reflected in its POWR Ratings. It 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 Value, Stability, and Quality and a D for Sentiment. It is ranked #52 out of 61 stocks in the D-rated Auto & Vehicle Manufacturers industry. Click here to see the other ratings of LCID for Growth and Momentum.
Ginkgo Bioworks Holdings, Inc. (DNA)
DNA engages in the development of a platform for cell programming. Its platform is used to program cells to enable the biological production of products, such as novel therapeutics, food ingredients, and chemicals derived from petroleum.
For the third quarter ended September 30, 2022, DNA’s revenue declined 14.5% from the year-ago value to $66.40 million. Its operating expenses increased 589.9% year-over-year to $719.42 million. The company’s loss from operations widened 2,348.3% year-over-year to $653.02 million. Also, its adjusted EBITDA loss narrowed by 287.2% year-over-year to $69.63 million.
Furthermore, the company’s net loss worsened by 553.3% year-over-year to $669.06 million, while net loss per share attributable to DNA common stockholders came in at $0.41, widening 412.5% year-over-year.
Analysts expect DNA’s revenue to decline 40.8% year-over-year to $87.94 million for the fiscal fourth quarter ending December 2022. The company is expected to report a loss of $0.21 per share for the ongoing quarter. Moreover, the company has missed the consensus EPS estimates in all four trailing quarters.
Over the past year, the stock has plunged 93.5% to close the last trading session at $0.21. It has lost 49.1% over the past month.
DNA’s poor fundamentals and bleak outlook are reflected in its POWR Ratings. The stock has an overall F grade, equating to a Strong Sell in our rating system. Also, it has an F grade for Stability and a D for Momentum, Sentiment, Value, and Quality.
Bed Bath & Beyond Inc. (BBBY)
BBBY and its subsidiaries operate a chain of retail stores. It sells a range of domestic merchandise, like bed linens, bath items, kitchen textiles, home furnishings, such as kitchen and tabletop items, fine tabletop, basic housewares, general home furnishings, consumables, and various juvenile products.
On November 14, BBBY announced that it had entered privately negotiated exchange agreements with various existing institutional holders of its 3.749% senior unsecured notes due 2024, 4.915% senior notes due 2034, and 5.165% senior notes due 2044. The existing holders exchanged around $69 million aggregate principal amount of 2024 notes, $5.8 million of 2034 notes, and $48.2 million of 2044 notes.
BBBY’s net sales came in at $1.44 billion for the second quarter that ended August 27, 2022, down 27.6% year-over-year. The company’s operating loss widened 311.6% year-over-year to $346.20 million. Its adjusted net loss came in at $256 million compared to an income of $4 million in the previous year’s period, while its adjusted loss per share was $3.22 compared to an EPS of $0.04 in the prior-year period.
Street expects BBBY’s revenue to decrease 23.8% year-over-year to $5.99 billion for the fiscal year (ending February 2023). The company’s loss per share for the current year is expected to worsen by 717.5% year-over-year to $8.83. In addition, the company has failed to surpass its consensus revenue estimates in each of the trailing four quarters.
Shares of BBBY have slumped 82.5% year-to-date to close the last trading session at $2.65.
BBBY’s bleak prospects 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.
BBBY has an F grade for Stability and Sentiment and a D for Quality. The stock is ranked 56 among 59 stocks in the Home Improvement & Goods industry.
Click here to see the additional POWR Ratings for BBBY (Momentum, Growth, and Value).
LCID shares were trading at $6.76 per share on Thursday morning, down $0.42 (-5.85%). Year-to-date, LCID has declined -82.23%, versus a -18.85% 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.3 F-Rated Stock to Stay Far Away From appeared first on StockNews.com