With inflation far from the Fed’s control, analysts are forecasting the possibility that the central bank will continue its aggressive rate hikes. With recession fears mounting and market uncertainty lingering, we think fundamentally weak stocks Twitter (TWTR), GameStop (GME) and Opendoor Technologies (OPEN) are best avoided right now. Continue reading….
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The 8.3% yoy rise in the CPI in August supports the Fed raising interest rates aggressively. Vanguard expects the benchmark interest rate to end at this year 3.75% and 2023 at 4.25%. Also, the investment manager has estimated a 65% chance of a recession in 2023.
Steve Hanke, professor of applied economics at Johns Hopkins University, said: “We will have that a whopper of a recession in 2023.” Amid mounting recession fears, a survey last month showed More than half of all US companies are planning layoffs as they brace for an economic downturn.
Against this backdrop, we hold fundamentally weak stocks of Twitter, Inc. (TWTR), GameStop Corp. (GME) and Opendoor Technologies Inc. (OPEN) are now best avoided.
Twitter, Inc. (TWTR)
TWTR acts as a platform for real-time public self-expression and conversation. The company’s main product is Twitter, a platform that enables users to consume, create, distribute and discover content.
On September 13, 2022, TWTR shareholders approved the previously announced merger agreement for the acquisition of TWTR by Elon Musk affiliates. Musk, however, was try to finish the deal. The social media company is suing Musk for allegedly violating the agreement, and a trial is expected to begin in mid-October.
TWTR’s revenue was $1.18 billion for the second quarter ended June 30, 2022, slightly below the prior year period. Non-GAAP net loss was $57.73 million compared to income of $174.52 million in the previous period.
Additionally, non-GAAP loss per share was $0.08 compared to earnings per share of $0.20 in the prior year period. In addition, it is customized EBITDA was $111.70 million, down 67.5% year-on-year.
TWTR earnings per share are expected to decrease 27.3% year over year to $0.24 for the quarter ended December 2022. It has missed EPS estimates in three of the last four quarters. Over the past month, the stock lost 5.3% to close the last trading session at $41.66.
TWTR’s POWR ratings reflect his poor prospects. It has an overall grade of D, indicating a sale. The POWR Ratings evaluate stocks based on 118 different factors, each with its own weighting.
Also, the stock has a D-score for Momentum, Stability, and Sentiment. click here to access the additional POWR scores for TWTR (Growth, Value and Quality). TWTR ranks 45th out of 65 F-rated stocks Internet Industry.
GameStop Corp. (GME)
Specialty retailer GME offers games and entertainment products through its e-commerce properties and various stores in the United States, Canada, Australia and Europe.
GME net sales for the second quarter ended July 30, 2022 decreased 4% year-on-year to $1.14 billion. Gross profit was $282.20 million, down 12.1% year-on-year, while net loss was $108.70 million, up 76.5% year-on-year.
GME’s earnings per share are expected to fall 20.2% year-on-year to minus $1.37 in 2023. Earnings per share are expected to remain negative in 2024. Additionally, it has missed EPS estimates in three of the last four quarters. Over the past month, the stock is down 20.6% to close the last trading session at $28.96.
GME has an overall grade of F, which equates to a strong sell in our POWR rating system. Also, it has an F grade for stability and a D for growth, momentum, and mood.
click here to access GME ratings for value and quality. It is ranked 44th out of 46 stocks in the ranking specialist dealer Industry.
Opendoor Technologies Inc. (OPEN)
OPEN operates a digital platform for residential real estate in the USA. The Company’s platform allows consumers to buy and sell a home online. It also offers title insurance and escrow services.
OPEN’s revenue for the second quarter ended June 30, 2022 was $4.20 billion, an increase of 254% over the prior year. However, total operating expenses were $454 million, up 46% year over year. Total liabilities for the period ended June 30, 2022 were $7.78 billion compared to $7.26 billion for the period ended December 31, 2021.
OPEN revenue is expected to decrease 25.4% year-on-year to $2.85 billion for the quarter ended December 2022. Earnings per share for the same period are expected to fall 48.3% year over year to minus $0.43. It has missed EPS estimates in two of the last four quarters. Over the past month, the stock lost 18.3% to close the last trading session at $3.88.
OPEN’s POWR ratings are consistent with this bleak outlook. The stock has an overall rating of F, which equates to a Strong Sell in our proprietary rating system. Additionally, the stock has an F rating for stability, sentiment, and quality, and a D rating for growth and momentum.
We also evaluated OPEN for Value. click here to access all OPEN ratings. It is ranked 40th out of 42 F-rated stocks real estate services Industry.
TWTR shares traded at $42.01 per share on Tuesday afternoon, up $0.35 (+0.84%). Year-to-date, TWTR is down -2.80% versus a -18.53% gain in the benchmark S&P 500 index over 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 commentary.
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