Robinhood Markets, Inc. (HOOD) operates as an online discount brokerage company offering zero-commission trading services on several U.S.-listed securities. The company provides a web- and mobile-based platform that makes buying and selling stocks simple and seemingly free. The company has net cumulative funded accounts of 22.9 million and 14 million monthly active users.
HOOD became wildly popular during the height of the pandemic among millennial and Gen Z traders. Several HOOD users bet on meme stocks to generate massive gains from their short squeezes. Despite weak fundamentals, many stocks traded on its platform soared to unsustainable prices solely based on social-media hype surrounding them.
However, HOOD has recently incurred significant losses as cryptocurrency prices declined and the stock market plunged on fears of record-high inflation, the Fed’s hawkish stance, and the possibility of a recession. The company’s net revenues declined 44% year-over-year to $318 million, and its net loss stood at $295 million for the second quarter ended June 30, 2022.
Since all stocks traded on HOOD’s platform are not fundamentally sound, investors should be judicious while investing in them. It could be wise to buy HOOD stock Microsoft Corporation (MSFT) and hold Ford Motor Company (F), given their fundamental strength. However, PayPal Holdings, Inc. (PYPL) is not well-positioned to survive the macroeconomic headwinds. So, it is best avoided now.
Stock to Buy:
Microsoft Corporation (MSFT)
MSFT is a leading American multinational technology company that develops, licenses, and markets computer software, services, electronic devices, and solutions worldwide. The company operates through three segments: Productivity and Business Processes; Intelligent Cloud; and More Personal Computing.
On August 4, MSFT and Volpara Health Technologies, a global health technology software leader providing an integrated platform for personalized breast care, collaborated to accelerate the creation of a solution that detects and quantifies breast arterial calcifications (BAC).
Integrating Microsoft Azure Machine Learning, part of the Azure AI platform, might help improve Volpara’s BAC model and data processing.
On July 20, MSFT and Oracle Corp (ORCL) announced the general availability of Oracle Database Service for Microsoft Azure. With this new offering, MSFT’s customers could get direct, streamlined access to Oracle Database services in Oracle Cloud Infrastructure (OCI).
MSFT announced Microsoft Viva Sales in June, a new seller experience application. Viva Sales works with any seller’s CRM to automate data entry and brings AI-powered intelligence to sellers in Microsoft 365 and Microsoft Teams. This will allow sellers to personalize their customer engagements more seamlessly toward faster deal closure. This new offering might boost the company’s revenues.
MSFT’s revenue increased 12.4% year-over-year to $51.87 billion, and its gross margin grew 10.2% year-over-year to $35.44 billion in the fiscal 2022 fourth quarter ended June 30, 2022. Its operating income improved 7.5% from the prior-year period to $20.53 billion. The company’s net income and EPS came in at $16.74 billion and $2.23, up 1.7% and 2.8%, respectively, year-over-year.
The consensus revenue estimate of $220.58 billion for its fiscal year 2023 (ending June 2023) represents an increase of 11.3% from the previous year. The consensus EPS estimate of $10.22 for the ongoing year indicates an 11% year-over-year rise. MSFT has surpassed the consensus revenue and EPS estimates in three of the trailing four quarters.
The stock has gained 7.6% over the past month to close the last trading session at $282.30.
MSFT's POWR Ratings reflect a strong outlook. The stock has an overall rating of B, which translates to a Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
MSFT has a grade of B for Stability and Quality. It is ranked #11 of 55 stocks in the Software - Business industry. Click here to see MSFT's POWR Ratings for Growth, Value, Sentiment, and Momentum.
Stock to Hold:
Ford Motor Company (F)
F develops, manufactures, markets, and sells a wide range of Ford cars, trucks, utility vehicles, electrified vehicles, and Lincoln luxury vehicles worldwide. The company operates through three business segments: Automotive; Mobility; and Ford Credit. It services retail and commercial customers, including automotive deals, leasing companies, rental car companies, and governments.
Yesterday, F reopened order banks for the next wave of reservation holders of the famous F-150 Lightning with new improvements, such as boosting its standard range battery models to an EPA-estimated range of 240 miles and adding Pro Trailer Hitch Assist Technology. This is expected to boost the company’s revenues.
Also, on July 28, F unveiled the 2023 Ford F-150® Lightning™ Pro Special Service Vehicle, America’s first electric pickup truck purpose-based for police. The 2023 Ford F-150 Lightning Pro SSV blends Built Ford Tough® power and performance with the vehicle’s high-tech electric platform and innovation with Ford Pro’s real-time software and support. The new launch might accelerate the company’s growth and profitability.
However, F is highly dependent on its suppliers, and a shortage of critical components, including semiconductors and raw materials, could disrupt the company’s production. In addition, F’s vehicles could be affected by defects that result in delays in new model launches or increased warranty costs. A recession or significant geopolitical events could adversely affect the sales volumes in any of F’s key markets.
In the fiscal 2022 second quarter ended June 30, 2022, F's revenues increased 50.2% year-over-year to $40.19 billion. Its operating income amounted to $2.87 billion, compared to a $22 million loss in the prior-year period. The company's net income and earnings per share attributable to F came in at $638 million and $0.16, up 15.4% and 14.3%, respectively, year-over-year.
However, as of June 30, 2022, F’s cash and cash equivalents came in at $19.52 billion, compared to $20.54 billion as of December 31, 2021.
Analysts expect F’s EPS to grow 30.4% year-over-year to $2.07 for its fiscal year 2022, ending December 2022. The $146.54 billion consensus revenue estimate for the ongoing year represents a 16.2% rise from the last year. The company has topped the consensus revenue EPS estimates in three of the trailing four quarters.
The stock has gained 31.5% over the past month to close the last trading session at $15.19. However, it has declined 30.2% year-to-date.
F's overall C rating equates to a Neutral in our proprietary rating system. The stock has a B grade for Growth and Value. It has a grade of C for Momentum, Sentiment, and Quality and a D for Stability.
Within the Auto & Vehicle Manufacturers industry, the stock is ranked #22 of 66 stocks. Click here to get access to POWR Ratings for F.
Stock to Sell:
PayPal Holdings, Inc. (PYPL)
PYPL is a leading American digital payment company. The company operates a technology platform that allows digital payments on behalf of consumers and merchants worldwide. PYPL offers payment solutions under the names of PayPal, PayPal Credit, Venmo, Xoom, Hyperwallet, Zettle, Honey, and Braintree. The company operates in approximately 200 markets and 100 currencies.
On May 16, PYPL priced its $3 billion senior notes offering, consisting of a $500 million aggregate principal amount of 3.9% notes due 2027, $1 billion of 4.4% notes due 2032, $1 billion of 5.05% notes due 2052, and $500 million of 5.25% notes due 2062. The note offering is expected to increase the company’s debt and interest.
In the fiscal 2022 second quarter ended June 30, 2022, PYPL's operating expenses increased 18.2% year-over-year to $6.04 billion. Its non-GAAP operating income declined 21.3% year-over-year to $1.30 billion. In addition, the company's non-GAAP net income and non-GAAP net income per share came in at $1.08 billion and $0.93, down 20.8% and 19.1%, respectively, from the prior-year period.
Analysts expect PYPL’s EPS to decline 14.2% from the prior-year period to $0.95 for the fiscal 2022 third quarter (ending September 2022). Furthermore, the consensus EPS estimate for the current year (ending December 2022) is expected to come in at $3.93, representing a decline of 14.6% year-over-year.
PYPL’s shares have plunged 51.5% year-to-date to close the last trading session at $94.48.
PYPL’s POWR Ratings are consistent with this bleak outlook. The stock has an overall rating of D, which translates to a Sell in our proprietary rating system. Within the D-rated Consumer Financial Services industry, it is ranked #39 of 48 stocks.
Click here to see PYPL’s POWR Ratings for Momentum, Value, Growth, Sentiment, Quality, and Stability.
MSFT shares rose $1.27 (+0.45%) in premarket trading Wednesday. Year-to-date, MSFT has declined -15.69%, versus a -12.75% 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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