Wall Street has been abuzz with the return of the meme stocks craze over the past few months. However, as the stock market is expected to remain under considerable pressure in the upcoming months, it could be wise to avoid fundamentally weak overhyped stocks Rivian Automotive (RIVN), Coinbase (COIN), DraftKings (DKNG), AMC Entertainment (AMC), and Bed Bath & Beyond (BBBY). Let’s discuss….
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After a lull, Wall Street has witnessed the comeback of the meme frenzy over the past few months. Last year, meme stocks took the whole world by storm after their logic-defying rallies despite fundamental weakness.
Since the outsized rallies in meme stocks were not backed by fundamentals or positive news, these stocks failed to sustain the price levels they reached last year. And many retail investors incurred heavy losses as these meme stocks eventually crashed back to earth.
The return of the meme frenzy this year is evident from the outsized rallies of Bed Bath & Beyond Inc. (BBBY) and AMC Entertainment Holdings, Inc. (AMC) earlier this year. However, the hype around these meme stocks died out quickly because of the uncertain macroeconomic environment.
The Fed increased the benchmark interest rate by 75 basis points yesterday. The central bank officials are now predicting that the key rate will end this year at a range of 4.25% to 4.5%, up from the previously indicated 3.25% to 3.5% in June.
This is expected to keep the stock market under pressure in the upcoming months. Given this backdrop, it could be wise to avoid fundamentally weak overhyped stocks Rivian Automotive, Inc. (RIVN), Coinbase Global, Inc. (COIN), DraftKings Inc. (DKNG), AMC Entertainment Holdings, Inc. (AMC), and Bed Bath & Beyond Inc. (BBBY).
Rivian Automotive, Inc. (RIVN)
RIVN designs, develops, and manufactures electric vehicles (EVs) and sells them directly to consumer and commercial markets. The company’s services include digitally enabled financing, telematics-based insurance, proactive vehicle membership, and software services, charging solutions, a data-driven vehicle resale program, and FleetOS, a centralized fleet management subscription platform.
RIVN’s total operating expenses increased 73.1% year-over-year to $1 billion for the second quarter ended June 30, 2022. The company’s loss from operations widened 194.5% year-over-year to $1.71 billion.
Its adjusted net loss widened 153.1% year-over-year to $1.47 billion. Also, its adjusted EBITDA loss widened 133.4% year-over-year to $1.30 billion. In addition, its adjusted loss per share came in at $1.62, compared to $5.75 in the year-ago period.
Analysts expect RIVN’s EPS for the quarter ending September 30, 2022, is expected to remain negative. Its EPS is expected to decline 31.6% per annum over the next five years. The stock has fallen 66.1% year-to-date to close the last trading session at $35.10.
RIVN’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 Value, Stability, and Quality. It is ranked #60 out of 63 stocks in the D-rated Auto & Vehicle Manufacturers industry. Click here to see the other ratings of RIVN for Growth, Momentum, and Sentiment.
Coinbase Global, Inc. (COIN)
COIN is a financial technology company that provides end-to-end economic infrastructure and technology. The company offers the primary financial account in the crypto economy for retailers, a marketplace with a pool of liquidity for transacting in crypto assets for institutions, and technology and services that enable ecosystem partners to build crypto-based applications and securely accept crypto-asset payments.
On August 9, 2022, COIN announced that it was facing a federal investigation for the possible sale of unregistered securities. If the ongoing investigations against the company are true, it could seriously affect its business model while being subjected to various sanctions and hefty fines.
COIN’s net revenue for the fiscal second quarter ended June 30, 2022, declined 63.7% year-over-year to $808.32 million. Its total operating expenses increased 36.9% year-over-year to $1.85 billion. The company’s net loss came in at $1.09 billion, compared to a net income of $1.61 billion in the year-ago period. Also, its loss per share came in at $4.98, compared to an EPS of $6.42 a year ago.
For the quarter ending September 30, 2022, COIN’s EPS is expected to be negative. Its revenue for the quarter ending December 31, 2022, is expected to decline 69.7% year-over-year to $757.83 million. The stock has declined 73.2% year-to-date to close the last trading session at $67.64.
COIN’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 Growth, Stability, and Sentiment and a D for Value. Within the F-rated Software – Application industry, it is ranked #148 out of 149 stocks. Click here to see the other COIN ratings for Momentum and Quality.
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 operating loss came in at $308.92 million for the second quarter that ended June 30, 2022. The company’s adjusted EBITDA loss widened 24% year-over-year to $118.13 million. Its net loss came in at $217.10 million.
Analysts expect DKNG’s EPS for the quarter ending September 30, 2022, to remain negative. Over the past year, the stock has declined 68.3% to close the last trading session at $16.72.
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 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, Momentum, and Sentiment.
AMC Entertainment Holdings, Inc. (AMC)
AMC and its subsidiaries engage in the theatrical exhibition business. The company owns, operates, or has interests in theaters in the United States and Europe.
AMC’s operating costs and expenses increased 59.5% year-over-year to $1.18 billion for the second quarter ended June 30, 2022. The company’s adjusted net loss narrowed 70% year-over-year to $102.80 million. Its adjusted loss per share came in at $0.20, compared to $0.71 in the year-ago period.
For the quarter ending September 30, 2022, AMC’s EPS is expected to remain negative. Over the past year, the stock has declined 77.8% to close the last trading session at $8.60.
AMC’s POWR Ratings are consistent with this bleak outlook. It has an overall rating of D, which translates to a Sell in our proprietary rating system.
It has an F grade for Stability and Sentiment. Within the F-rated Entertainment – Movies/Studios industry, it is ranked last out of six stocks. To see the other ratings of AMC for Growth, Value, Momentum, and Quality, click here.
Bed Bath & Beyond Inc. (BBBY)
BBBY operates a retail store chain. The company sells domestic merchandise, bath items, kitchen textiles, and home furnishings. It sells its offering through various websites and applications.
BBBY’s net sales declined 25.1% year-over-year to $1.46 billion for the first quarter that ended May 28, 2022. The company’s adjusted EBITDA loss came in at $224 million, compared to an adjusted EBITDA of $86 million.
Its adjusted net loss came in at $225.23 million, compared to a net income of $4.92 million. In addition, its adjusted loss per share came in at $2.83, compared to an adjusted EPS of $0.05.
Analysts expect its EPS for the current quarter to be negative. Its revenue for fiscal 2023 is expected to decline 21.4% year-over-year to $6.18 billion. It failed to surpass consensus EPS estimates in each of the trailing four quarters. Over the past year, the stock has lost 68.6% to close the last trading session at $7.27.
BBBY’s poor prospects are also apparent in its POWR Ratings. The stock has an overall D rating, equating to a Sell in our proprietary rating system.
It has an F grade for Stability and Sentiment and a D for Growth and Momentum. It is ranked #58 out of 62 stocks in the Home Improvement & Goods industry. Click here to see the other ratings of BBBY for Value and Quality.
RIVN shares rose $0.07 (+0.20%) in premarket trading Thursday. Year-to-date, RIVN has declined -66.08%, versus a -19.57% 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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