The Fed launched its third consecutive 75-basis-point rate hike last week, lifting its policy rate to three percentage points this year. Fed officials have been adamant about raising the rates to fight the multi-decade high inflation, even at the cost of a slowing economy. This has led to major benchmark indexes plummeting significantly last week.
Moreover, the aggressive rate hiking, coupled with the U.K.’s tax cuts last week, has caused the U.S. dollar to surge. “Such U.S. dollar strength has historically led to some kind of financial/economic crisis,” wrote Morgan Stanley’s chief U.S. equity strategist, Michael Wilson. However, the central bank officials have sloughed off rising volatility in global markets and said their priority remained controlling domestic inflation.
We think fundamentally weak stocks, Las Vegas Sands Corp. (LVS), Roblox Corporation (RBLX), Carnival Corporation & plc (CCL), Marathon Digital Holdings, Inc. (MARA), and ContextLogic Inc. (WISH) could be best avoided during this bear market.
Las Vegas Sands Corp. (LVS)
LVS and its subsidiaries develop, own, and operate integrated resorts in Asia and the United States. Its properties include the Marina Bay Sands, The Venetian Macao, The Plaza, Four Seasons Hotel Macao, The Londoner Macao, The Parisian Macao, and Sands Macao.
LVS’ net revenues decreased 10.9% year-over-year to $1.05 billion for the fiscal quarter ended June 30, 2022. Its operating loss increased 5.8% year-over-year to $147 million, while its net loss came in at $290 million, up 51% year-over-year. Moreover, the company’s EPS widened 52% from the prior-year quarter to $0.38.
Analysts expect LVS’ EPS to remain negative in 2022. In addition, it missed EPS estimates in three of the four trailing quarters.
In terms of its forward Price/Book, LVS is currently trading at 7.57x, 232% higher than the industry average of 2.28x. Its forward EV/EBITDA multiple of 40.51 is 387.8% higher than the industry average of 8.30.
Over the past nine months, the stock has lost 8.1% to close the last trading session at $39.66.
LVS’ 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. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
The stock has an F grade for Value and a D for Stability. LVS is ranked #22 of 27 stocks in the D-rated Entertainment – Casinos/Gambling industry.
We’ve also rated LVS for Growth, Momentum, Sentiment, and Quality. Click here to access all the LVS ratings.
Roblox Corporation (RBLX)
RBLX operates as a developer and operator of an online entertainment platform. Its offerings include Roblox Studio, Roblox Client, Roblox Education, and Roblox Cloud. The company serves customers in the United States, the United Kingdom, Canada, Europe, China, the Asia-Pacific, and internationally.
RBLX’s loss from operations rose 19.1% from its year-ago value to $170.27 million in the fiscal second quarter ended June 30. The company’s net loss attributable to common stockholders grew 25.9% from the same period last year to $176.44 million. Net loss per share attributable to common stockholders increased 20% year-over-year to $0.30.
Street expects RBLX’s EPS to come in at a negative $0.31 for the fiscal third quarter ending September 2022, indicating a decrease of 136.1% from the prior-year period. The consensus revenue is estimated to be $681.04 million for the same quarter.
In terms of its forward Price/Sales, RBLX is currently trading at 7.77x, 620.4% higher than the industry average of 1.08x. Its forward EV/EBITDA multiple of 64.74 is 766% higher than the industry average of 7.48.
RBLX’s shares have declined 65.6% year-to-date to close its last trading session at $35.55. It has slumped 65.1% over the past nine months.
RBLX's overall F rating translates to a Strong Sell in our POWR Ratings system. The stock also has an F grade for Stability and a D in Growth, Value, Momentum, and Sentiment. It is ranked last in the 22-stock Entertainment – Toys & Video Games industry.
To see additional POWR Ratings for Quality for RBLX, click here.
Carnival Corporation & plc (CCL)
CCL operates as a leisure travel company In the United States and internationally. Its ships visit port calls under the brand names Carnival Cruise Line, Princess Cruises, Holland America Line, P&O Cruises (Australia), Seabourn, Costa Cruises, AIDA Cruises, P&O Cruises (UK), and Cunard. The company also provides port destinations and other services, as well as owns and operates hotels, lodges, glass-domed railcars, and motor coaches.
Last month, CCL’s Princess cruises canceled 11 sailings aboard the Diamond Princess due to staffing issues that have been consistent across the cruise industry this year. According to the company, the brand faced “labor challenges” as travelers flocked back to cruises, and its ships resumed sailing with increased occupancy.
For the second quarter ended May 31, 2022, CCL’s operating loss came in at $1.47 billion. The company reported a net loss of $1.83 billion, while its loss per share amounted to $1.61.
CCL’s EPS is expected to come in at a negative $0.29 in the quarter ending November 2022.
CCL’s forward Price/Sales multiple of 0.82 is 6.3% higher than the industry average of 0.77. In terms of its forward EV/Sales, the stock is trading at 2.98x, 190% higher than the industry average of 1.03x.
The stock has declined 63.8% over the past year and 55.5% year-to-date to close the last trading session at $8.90.
CCL’s weak fundamentals are reflected in its POWR Ratings. The stock has an overall F rating, equating to a Strong Sell in our proprietary rating system. CCL also has an F grade for Stability and Sentiment and a D for Value and Quality. Within the F-rated Travel – Cruises industry, it is ranked #2 of 4 stocks.
In addition to the POWR Rating grades we’ve stated above, you can see CCL ratings for Growth and Momentum here.
Marathon Digital Holdings, Inc. (MARA)
MARA, a digital asset technology company, mines cryptocurrencies with a focus on the blockchain ecosystem and the generation of digital assets in the United States.
MARA’s revenues declined 15% year-over-year to $24.92 million for the second quarter ended June 30, 2022. Its operating loss widened 61.6% year-over-year to $178.21 million. The company’s net loss increased 76% year-over-year to $191.65 million. Also, its loss per share came in at $1.75, up 60.5% from the prior-year quarter.
Analysts expect MARA’s loss per share for the current quarter to widen 33.1% year-over-year to $0.29. Its revenue is expected to decline 46.1% year-over-year to $27.85 million in the same period. It also failed to surpass the consensus EPS estimates in three of the trailing four quarters.
MARA’s forward EV/EBITDA multiple of 31.60 is 175.2% higher than the industry average of 11.48. In terms of its forward EV/Sales, the stock is trading at 10.22x, 325.9% higher than the industry average of 2.40x.
Over the past year, the stock has fallen 74.9% to close the last trading session at $9.61. It slumped 30.9% over the past month.
It is no surprise that MARA has an overall rating of F, which translates to a Strong Sell in our proprietary rating system. The stock also has an F grade for Growth, Value, Stability, Sentiment, and Quality. It belongs to the Financial Services (Enterprise) industry.
To see the rating of MARA for Momentum, click here.
ContextLogic Inc. (WISH)
WISH, an e-commerce company operates an e-commerce platform that connects users to merchants in Europe, North America, South America, and internationally. The company also provides marketplace and logistics services to its merchants.
WISH’s revenue decreased 79.6% year-over-year to $134 million in the second quarter ended June 30, 2022. Its gross profit declined 89.1% from the prior-year quarter to $42 million. The company reported an operating loss of $91 million, while its net loss came in at $90 million. In addition, its cash and cash equivalents came in at $693 million, representing a decline of 31.3% for the six months ended June 30, 2022.
The consensus EPS estimate of negative $0.17 indicates a 220.8% year-over-year decline in the current quarter ending September 2022. Also, the consensus revenue estimate of 155.98 million represents a decline of 57.6% year-over-year in the same period.
In terms of its forward Price/Sales, WISH is currently trading at 0.82x, 6% higher than the industry average of 0.77x.
The company’s shares have plummeted 86.5% over the past year and 73.3% year-to-date to close its last trading session at $0.88.
WISH’s poor prospects are reflected in its POWR Ratings. The stock has an overall D rating, equating to Sell in our proprietary rating system. WISH has an F grade for Stability and a D for Quality. Of the 64 stocks in the F-rated Internet industry, WISH is ranked #54.
Beyond what is stated above, you can view WISH ratings for Growth, Momentum, Value, and Sentiment here.
LVS shares were trading at $39.86 per share on Tuesday morning, up $0.20 (+0.50%). Year-to-date, LVS has gained 5.90%, versus a -21.59% rise in the benchmark S&P 500 index during the same period.
About the Author: Komal Bhattar
Komal's passion for the stock market and financial analysis led her to pursue investment research as a career. Her fundamental approach to analyzing stocks helps investors identify the best investment opportunities.
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