Record high inflation, monetary policy tightening to control it, and the consequent fears of an economic slowdown have led to a pullback in the markets, with major indices plummeting lately. Moreover, Jerome Powell’s speech at Jackson Hole indicates the Fed’s determination to keep raising rates and near-term pain for the markets.
Some investors might view this as an opportunity to load up on stocks, which have gotten even cheaper. However, the Fed’s unrelenting hawkishness spells trouble for firms that need funds to sustain and grow themselves before they can find their own feet.
Hence, we think it would be wise to avoid fundamentally weak penny stocks Tilray Brands, Inc. (TLRY) and Mullen Automotive Inc. (MULN) until they have weathered their imminent struggles and emerged stronger.
Tilray Brands, Inc. (TLRY)
Headquartered in Leamington, Canada, TLRY operates globally as a cannabis-lifestyle and consumer packaged goods company. It operates through four segments Cannabis Business; Distribution Business; Beverage Alcohol Business; and Wellness Business. It has a market capitalization of $1.84 billion.
In the fourth quarter of fiscal 2022, TLRY’s market share in Canada, its home market, dropped to 8.3% from 12.8% held in the second quarter. Management of the company did not explain this decline, and analysts attribute this to increased competition which is expected to keep the margins under pressure.
For the fiscal 2022 fourth quarter ended May 31, TLRY’s reported a gross loss of $6.73 million, compared to a $22.50 million gain in the prior-year quarter. Its operating expenses came in at $460.69 million, up 379% year-over-year. Also, its operating loss for the period widened 534.3% year-over-year to $467.42 million.
In addition, the company reported a net loss of $457.80, translating to a $0.90 loss per share during the quarter, compared to a net profit of $33.62 million and a $0.38 profit per share a year ago.
TLRY’s consensus revenue estimate of $158.56 million for the first quarter of the current fiscal 2023 (ended August 2022) indicates a 5.6% year-over-year decline. Analysts expect the company’s loss per share to come in at $0.07 in the same quarter. Also, TLRY has missed the consensus EPS estimates in each of the trailing four quarters, which is disappointing.
The stock has declined 38.1% over the past six months and 76.2% over the past year to close the last trading session at $3.17.
TLRY’s POWR Ratings reflect this bleak outlook. 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.
TLRY also has a grade of F for Momentum and Sentiment and a D for Value, Stability, and Quality. In the F-rated, Medical – Pharmaceuticals industry, it is ranked #165 among 167 stocks.
Click here to see the additional POWR Ratings for TLRY.
Mullen Automotive Inc. (MULN)
MULN is an electric vehicle (EV) manufacturer and distributor that operates in various business verticals focused on the automobile industry. The company owns and runs businesses such as CarHub, which uses AI to give a user-friendly way to buy, sell, and own a car, and Mullen Energy, which sells battery technology and emergency point-of-care solutions. The company has a market capitalization of $338.32 million.
On September 1, 2022, MULN announced a partnership with Watergen Inc. to develop and equip MULN’s electric vehicles with technology that will produce fresh drinking water from the air for in-vehicle consumer and commercial applications. The company is unlikely to enjoy a competitive advantage since Watergen already collaborates with other leading OEMs.
During the third quarter of the current fiscal ended June 30, 2022, MULN’s loss from operations widened 184.5% year-over-year to $18.22 million. Its net loss worsened 289.9% year-over-year to $59.47 million. The company loss per share came in at $0.16. Furthermore, cash outflow from operating activities was $43.22 million, up 231.5% year-over-year.
The stock has slumped 37.7% over the past six months and 93.6% over the past year to close the last trading session at $0.66.
MULN’s POWR Ratings confirm our bearishness regarding the stock. The company has an overall rating of F, which translates to a Strong Sell in our proprietary rating system. MULN also has an F grade for Value and Stability and a D for Sentiment and Quality.
MULN is ranked #55 out of 65 stocks in the Auto & Vehicle Manufacturers industry.
Click here to access the Growth and Momentum ratings for MULN.
TLRY shares rose $0.01 (+0.31%) in after-hours trading Wednesday. Year-to-date, TLRY has declined -54.20%, versus a -15.63% rise in the benchmark S&P 500 index during the same period.
About the Author: Santanu Roy
Having been fascinated by the traditional and evolving factors that affect investment decisions, Santanu decided to pursue a career as an investment analyst. Prior to his switch to investment research, he was a process associate at Cognizant. With a master's degree in business administration and a fundamental approach to analyzing businesses, he aims to help retail investors identify the best long-term investment opportunities.
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