Despite a rally today in the market, the S&P 500 posted it’s worst month since March 2022. The Dow and Nasdaq experienced terrible months, down 3.3% and 8.9%, respectively.
Shorting, or short-selling, is a speculative trading strategy in which a trader opens up a short position by borrowing shares of a company, betting on its unprofitability, or a price decline, which allows the trader to buy them at a lower price for a profit. According to data from the financial analytics firm S3 Partners, the stock market’s slide at the start of this year led short-sellers to gain $114 billion in realized and unrealized gains as of January 21.
That’s why today we're highlighting 3 stocks from our Top 10 Short screen, which is just 1 of the 10 outperforming screens in our POWR Screens 10 service (more on that below). Given the possibility of further market corrections, Peloton Interactive, Inc. (PTON), Cronos Group Inc. (CRON), Blink Charging Co. (BLNK), and Vinco Ventures, Inc. (BBIG) could be ideal candidates to short, as they are trading at lofty valuations, despite possessing weak fundamentals.
Peloton Interactive, Inc. (PTON)
PTON is an interactive fitness products provider operating in North America and globally. The company’s offerings include connected fitness products with touchscreen for on-demand classes and connected fitness subscriptions for users.
On December 31, The Schall Law Firm, a shareholder rights law firm, reminded investors of a class-action lawsuit against PTON. The complaint alleges that the company had made false and misleading statements regarding its inventory levels and maintaining appropriate inventory to meet demand and strong business results after the COVID-19 pandemic. The company is also under investigation by several other law firms.
PTON’s forward EV/Sales multiple of 2.17 is 70.3% higher than the industry average of 1.27. In terms of its forward Price/Sales, the stock is currently trading at 2.00x, 88.9% above the industry average of 1.06x.
For the fiscal first quarter ended September 30, PTON’s total operating expenses increased 139.6% year-over-year to $622.40 million. Net income decreased 642.6% from the prior-year period to a negative $376 million, while net income per share attributable to common stockholders came in at a negative $1.25, down 725% from the same period the prior year.
The consensus EPS estimate of a negative $2.90 for the fiscal year 2022 indicates an 866.7% year-over-year decrease.
The stock has declined 82.3% over the past year and 78.3% over the past six months to close Friday’s trading session at $25.64.
PTON’s POWR Ratings reflect this bleak outlook. The stock has an overall rating of F, 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.
PTON has a Growth, Stability, Sentiment, and Quality grade of F and a Value grade of D. In the 66-stock Consumer Goods industry, it is ranked #65. The industry is rated D. Click here to see the additional POWR Ratings for PTON (Momentum).
Cronos Group Inc. (CRON)
CRON, based in Toronto, Canada, is a cannabinoid company that engages in manufacturing, marketing, and distributing hemp-derived supplements and cosmetic products. The company also operates in the cultivation, manufacturing, and marketing of cannabis and cannabis-derived products for the medical and adult-use markets.
On December 31, The Schall Law Firm announced that it was investigating CRON for securities laws violations. The investigation focuses on whether the company made false or misleading statements or failed to disclose information pertinent to investors. On November 9, CRON disclosed that its unaudited interim financial statements for the three-month and six-month period ended June 30 could not be relied upon. The company is also under investigation from the Rosen Law Firm, Bragar Eagel & Squire, P.C., Hagens Berman, etc.
In terms of its forward Price/Sales, CRON is trading at 18.72x, 234.1% above the industry average of 5.60x.
CRON’s cost of sales increased 99.6% year-over-year to $19.45 million in the fiscal second quarter ended June 30. Gross and operating losses went up 440.2% and 73.5% from the prior-year period to $15.78 million and $60.22 million, respectively.
Analysts expect CRON’s EPS to remain negative until fiscal 2022.
Over the past year, the stock has declined 67.1% to close Friday’s trading session at $3.41. It has declined 53.7% over the past six months.
It’s no surprise that CRON has an overall F rating, which translates to a Strong Sell in our POWR Rating system.
CRON has an F grade for Momentum and Quality and a D grade for Growth, Value, and Stability. It is ranked last in the 27-stock Agriculture industry. To see the additional POWR Rating for Sentiment for CRON, click here.
Blink Charging Co. (BLNK)
BLNK is the owner, operator, and provider of EV charging equipment and networked EV charging services. The company’s offerings include residential and commercial EV charging equipment and remote monitoring of charging stations.
On January 26, BLNK announced cooperation with Bridgestone Americas subsidiary Bridgestone Retail Operation (BSRO) for deploying 50 Blink IQ 200 charging stations at 25 Firestone Complete Auto Care and Wheel Works tire and automotive service centers. However, the gains from this collaboration might not be realized immediately.
BLNK’s forward EV/Sales multiple of 32.11 is 1,621.7% higher than the industry average of 1.86. Additionally, in terms of its forward Price/Sales, the stock is trading at 41.75x, 2,677.4% above the industry average of 1.50x.
For the fiscal third quarter ended September 30, BLNK’s loss from operations increased 304.4% year-over-year to $15.82 million. Net loss and net loss per share came in at $15.32 million and $0.36, up 291.4% and 200% from the same period the prior year, respectively.
Street EPS estimate for the fiscal year 2021 of a negative $1.25 indicates a 111.9% year-over-year decline.
BLNK’s stock has declined 61.8% over the past year and 45.3% over the past six months to close Friday’s trading session at $18.89.
BLNK’s poor prospects are reflected in its POWR Ratings. The stock has an overall F rating, which equates to a Strong Sell in our proprietary rating system.
BLNK has a Value, Stability, and Quality grade of F and a Growth, Momentum, and Sentiment grade of D. It falls under the Industrial – Equipment industry. Click here to see the POWR ratings for BLNK.
Vinco Ventures, Inc. (BBIG)
BBIG is a consumer product research, development, manufacturing, and sales company operating in North America, Asia-Pacific, and Europe. The company’s offerings include toys, homewares, electronics, and personal protective equipment.
On January 27, Cryptyde, Inc., a wholly-owned subsidiary of BBIG, announced that it had entered into a definitive agreement for raising debt and common equity of $42 million to begin trading as a public company. For this measure, BBIG expects to sell secured convertible senior notes worth $33.3 million and 1,500,000 shares of common stock at $8.00 per share, which might create a debt burden for the company.
In terms of its trailing 12 months EV/Sales, BBIG is trading at 29.72x, 2,074% above the industry average of 1.36x. Additionally, BBIG’s trailing 12 months Price/Sales multiple of 7.31 is 584.6% higher than the industry average of 1.07.
BBIG’s net revenues decreased 11.5% year-over-year to $2.23 million in the fiscal third quarter ended September 30. Adjusted net loss attributable to BBIG and adjusted net loss per share rose 1,607.8% and 126.7% to $48.40 million and $0.68, respectively.
The stock has declined 42.4% over the past three months and 14.9% over the past six months to close Friday’s trading session at $2.92.
BBIG has an overall rating of F, which translates to Strong Sell in our proprietary rating system. The stock has an F grade for Growth, Value, Stability, and Quality and a D grade for Sentiment. It is ranked last in the Consumer Goods industry.
In addition to the POWR Rating grades we’ve stated above, one can see BBIG ratings for Momentum here.
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PTON shares were trading at $27.33 per share on Monday afternoon, up $1.69 (+6.59%). Year-to-date, PTON has declined -23.57%, versus a -5.30% rise in the benchmark S&P 500 index during the same period.
About the Author: Anushka Dutta
Anushka is an analyst whose interest in understanding the impact of broader economic changes on financial markets motivated her to pursue a career in investment research.
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