Headwinds, such as the multi-decade high inflation, the Fed’s aggressive interest rate hikes, and persistent geopolitical tensions, have resulted in a massive sell-off in equities since the beginning of the year. Despite the recovery since July, many analysts believe the markets will tumble further if the Federal Reserve continues its aggressive interest rate hikes.
Minutes from the Federal Reserve’s recent policy meeting showed that the central bank would continue its aggressive policy tightening until inflation reached its target level. The anticipation of further interest rate hikes is expected to keep the market volatile in the near term.
SoFi Technologies, Inc. (SOFI), Shopify Inc. (SHOP), and Roblox Corporation (RBLX), which were once investors’ top choices, have declined 70% or more from their highs. Given their deteriorating fundamentals and bleak growth prospects, we think these stocks are best avoided now.
SoFi Technologies, Inc. (SOFI)
SOFI is a digital financial services company that operates through lending, financial services, and technology platforms. The company’s lending segment offers student, personal, and home loans, while the financial services segment provides cash management and investment services through SoFi Money, SoFi Invest, SoFi Credit Card, and SoFi Relay. In addition, its technology platform offers the benefits of Galileo and Apex.
SOFI’s net loss for the fiscal second quarter ended June 30, 2022, came in at $95.84 million, narrowing 42% from the year-ago period. Its loss per share narrowed 75% year-over-year to $0.12. Its noninterest expense increased 15.5% year-over-year to $458.24 million. As of June 30, 2022, the company’s total liabilities increased 6% from the year-end value of $4.47 billion on December 31, 2021, to $7.16 billion.
Analysts expect SOFI’s EPS for fiscal 2022 to remain negative. It has failed to surpass the consensus EPS estimates in three of the trailing four quarters. Over the past year, the stock has lost 54.2% to close the last trading session at $6.33. It is currently trading 74.3% below its 52-week high of $24.65, which it hit on November 11, 2021.
SOFI’s weak fundamentals 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 Stability and Quality and a D for Growth, Value, and Sentiment. It is ranked #107 out of 108 stocks in the F-rated Financial Services (Enterprise) industry. Click here to see the other rating of SOFI for Momentum.
Shopify Inc. (SHOP)
Headquartered in Ottawa, Canada, SHOP is a cloud-based, multi-channel commerce platform that offers subscription and merchant solutions to small and medium-sized businesses. Its platform enables merchants to display, manage, market, and sell their products through various sales channels.
In the fiscal second quarter (ended June 30, 2022), SHOP’s operating expenses increased 75.7% year-over-year to $845.85 million. Its operating loss amounted to $190.21 million compared to an operating income of $139.44 million in the year-ago period.
The company’s net loss and loss per share attributable to common shareholders amounted to $1.20 billion and $0.95, compared to a net income and EPS of $879.09 million and $0.69, respectively.
Analysts expect SHOP’s EPS for fiscal 2022 to remain negative. It has failed to surpass the consensus EPS estimate in three of the trailing four quarters. SHOP has declined 76.7% over the past year to close the last trading session at $34.20. It is currently trading 80.6% below its 52-week high of $176.29, which it hit on November 19, 2021.
SHOP's POWR Ratings reflect this bleak outlook. The stock has an overall rating of F, which translates to a Strong Sell in our proprietary rating system.
It has a D grade for Growth, Value, Stability, Sentiment, and Quality. It is ranked #29 out of 30 stocks in the F-rated Internet - Services industry. Click here to see SHOP's rating for Momentum.
Roblox Corporation (RBLX)
RBLX operates a human co-experience platform, where users interact with each other to play, explore and develop user-generated and 3D experiences for free. Its platform is powered by user-generated content that draws inspiration from gaming, entertainment, social media, and toys.
For its fiscal second quarter ended June 30, 2022, RBLX’s loss from operations widened 19.1% year-over-year to $170.27 million. Its net loss widened 25.9% year-over-year to $176.44 million. Also, its adjusted EBITDA decreased 69.6% year-over-year to $54.64 million. The company’s loss per share widened 20% from the year-ago value to $0.30.
Street expects the consensus loss per share estimate for the fiscal third quarter (ending September 2022) to decrease 149.7% year-over-year to $0.32. The consensus revenue estimate for fiscal 2022 is expected to decline marginally from its prior-year value to $2.71 billion.
The stock has slumped 47.5% over the past year to close the last trading session at $42.68. RBLX is currently trading 69.8% below its 52-week high of $141.60, which it hit on November 22, 2021.
RBLX’s POWR Ratings are consistent with this bleak outlook. It has an overall F rating, equating to a Strong Sell in our proprietary rating system. The stock has an F grade for Stability and a D for Growth, Value, Momentum, and Sentiment. It is ranked last out of 22 stocks in the Entertainment - Toys & Video Games industry. To see RBLX’s rating for Quality, click here.
SOFI shares were trading at $6.07 per share on Monday afternoon, down $0.26 (-4.11%). Year-to-date, SOFI has declined -61.61%, versus a -12.36% rise in the benchmark S&P 500 index during the same period.
About the Author: Shweta Kumari
Shweta's profound interest in financial research and quantitative analysis led her to pursue a career as an investment analyst. She uses her knowledge to help retail investors make educated investment decisions.
3 Once Popular Stocks Down More Than 70%, Is Now the Time to Buy? StockNews.com
