Although October inflation data came in lower than expected, showing signs that rising prices were finally cooling, inflation is far from the Fed’s target of 2%.
Moreover, the odds of a recession are rising as the Fed continues its rate hikes to fight the price pressures. The chance of a recession over 2023 has climbed to 65% from 60% in October. In addition, the University of Michigan’s consumer sentiment dropped to 54.7 in November, down 8.7% month-over-month.
Furthermore, amid surging tech layoffs, jobless expectations are expanding. Around 43% of participants in the New York Fed’s October survey expected the U.S. unemployment rate to be higher a year from now.
Given the grim outlook, it could be wise to avoid fundamentally weak stocks NVIDIA Corporation (NVDA), Carnival Corporation & plc (CCL), AMC Entertainment Holdings, Inc. (AMC), Peloton Interactive, Inc. (PTON), and Mullen Automotive, Inc. (MULN), which have been declining in price.
NVIDIA Corporation (NVDA)
NVDA provides graphics, computing, and networking solutions in the United States, Taiwan, China, and internationally. Its segments are Graphics and Compute & Networking.
On November 17, 2022, a class action suit was filed at a federal court in California over claims that NVDA’s new RTX 4090 graphics card burnt or melted power cables.
NVDA’s forward E.V./Sales of 15.18x is 443.2% higher than the industry average of 2.79x. Its forward Price/Sales of 14.68x is 480.2% higher than the industry average of 2.53x.
NVDA’s revenue came in at $5.93 billion for the third quarter that ended October 30, 2022, down 16.5% year-over-year. Its non-GAAP net income came in at $1.46 billion, down 51% year-over-year. Also, its non-GAAP EPS came in at $0.58, down 50.4% year-over-year.
NVDA’s revenue is expected to decline 20.3% year-over-year to $6.09 billion for the quarter ending January 2023. Its EPS is expected to fall 42.4% year-over-year to $0.76 for the same period. The stock has lost 46.7% year-to-date to close the last trading session at $156.77.
NVDA’s POWR Ratings reflect its poor prospects. It has an overall grade of D, which indicates a Sell. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
Also, the stock has a D grade for Growth, Value, and Stability. Click here to access the additional POWR Ratings for NVDA (Momentum, Sentiment, and Quality). NVDA is ranked #82 out of 92 stocks in the Semiconductor & Wireless Chip industry.
Carnival Corporation & plc (CCL)
CCL operates as a leisure travel company. Its ships visit approximately 700 ports under the Carnival Cruise Line, Princess Cruises, Holland America Line, P&O Cruises (Australia), Seabourn, Costa Cruises, AIDA Cruises, P&O Cruises (U.K.), and Cunard brand names.
CCL’s forward E.V./Sales of 3.38x is 199.4% higher than the industry average of 1.13x. Its forward Price/Sales of 0.98x is 15.1% higher than the industry average of 0.85x.
For the third quarter that ended August 31, 2022, CCL’s revenues came in at $4.30 billion, up 688.5% year-over-year. However, its operating costs and expenses came in at $4.58 billion, up 76.1% year-over-year.
Moreover, its cash and cash equivalents came in at $7.07 billion for the period ended August 31, 2022, compared to $8.94 billion for the period ended November 30, 2021.
Street expects CCL’s EPS to decrease 151.4% per annum for the next five years. It missed EPS estimates for all four trailing quarters. The stock has lost 52.7% year-to-date to close the last trading session at $9.51.
CCL’s POWR Ratings are consistent with this bleak outlook. The stock has an overall F rating, equating to a Strong Sell in our proprietary rating system. In addition, the stock has an F grade for Stability and a D for Value, Sentiment, and Quality.
We also have graded CCL for Growth and Momentum. Click here to access all of CCL’s ratings. It is ranked #2 out of four stocks in the F-rated Travel – Cruises industry.
AMC Entertainment Holdings, Inc. (AMC)
AMC and its subsidiaries engage in the theatrical exhibition business. The company owns, operates, or has interests in theaters in the United States and Europe.
AMC’s forward E.V./Sales of 3.29x is 71.5% higher than the industry average of 1.92x, while its forward EV/EBITDA of 99.31x is substantially higher than the 8.44x industry average.
AMC’s total revenues came in at $968.40 million for the third quarter that ended September 30, 2022, up 26.9% year-over-year. However, its operating costs and expenses came in at $1.08 billion, up 19.3% year-over-year. Its adjusted EBITDA came in at negative $12.90 million, compared to negative $5.40 million in the year-ago period.
Analysts expect AMC’s EPS to decline 217% per annum for the next five years. The stock has lost 55.8% year-to-date to close the last trading session at $7.39.
AMC’s overall D grade equates to a Sell in our proprietary rating system. Also, the stock has an F grade for Stability and a D for Value, Sentiment, and Quality.
Click here to access the additional POWR Ratings for AMC (Growth and Momentum). It is ranked last among seven stocks in the F-rated Entertainment - Movies/Studios industry.
Peloton Interactive, Inc. (PTON)
PTON operates an interactive fitness platform in North America and internationally. The company offers connected fitness products with a touchscreen.
PTON’s forward E.V./Sales of 2.08x is 90% higher than the industry average of 1.09x. Its forward Price/Sales of 1.39x is 62.5% higher than the industry average of 0.86x.
PTON’s total revenue came in at $616.50 million for the 2023 first quarter that ended September 30, 2022, down 23.4% year-over-year. Its gross profit came in at $217.20 million, down 17.4% year-over-year. In addition, its net loss came in at $408.50 million, up 8.6% year-over-year.
PTON’s revenue is expected to decrease 36.4% year-over-year to $721.10 million for the quarter ending December 2022. It missed EPS estimates in all four trailing quarters. The stock has lost 70% year-to-date to close the last trading session at $10.89.
PTON’s overall F rating equates to a Strong Sell in our POWR Ratings system. It has an F grade for Stability and Sentiment and a D for Value and Quality.
Click here for additional PTON ratings (Growth and Momentum). PTON is ranked #57 out of 59 stocks in the Consumer Goods industry.
Mullen Automotive, Inc. (MULN)
Electric vehicle company MULN manufactures and distributes electric vehicles. It also operates CarHub, a digital platform that leverages A.I. to offer an interactive solution for buying, selling, and owning a car.
Its trailing-12-month Price/Book of 7.12x is 243.3% higher than the 2.07x industry average.
MULN’s trailing-12-month ROTC and ROTA of negative 618.14% and 169.94% are significantly lower than the industry average of 6.67% and 4.74%, respectively.
MULN’s loss from operations came in at $18.22 million for the quarter that ended June 30, 2022, up 184.5% year-over-year. Also, its net loss came in at $59.47 million, up 289.9% year-over-year.
The stock has lost 94.8% year-to-date to close the last trading session at $0.27.
MULN has an overall F grade, equating to a Strong Sell in our POWR Ratings system. Also, it has an F grade for Value and Stability and a D for Sentiment and Quality.
Click here to access the MULN rating for Growth and Momentum. It is ranked #57 out of 64 stocks in the D-rated Auto & Vehicle Manufacturers industry.
NVDA shares were trading at $156.40 per share on Friday morning, down $0.37 (-0.24%). Year-to-date, NVDA has declined -46.79%, versus a -15.71% rise in the benchmark S&P 500 index during 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 commentaries.
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