A decline in GDP in the first quarter, and the possibility of further economic contraction due to the aggressive interest rate hikes, have led to a massive correction in the stock market over the past few weeks. Roughly $11 trillion of money has been wiped out from global stock markets so far.
The SPDR S&P 500 ETF (SPY) has lost 15.4% year-to-date. As analysts don’t expect the issues dampening the market sentiment to ease in the near term, fundamentally-weak stocks could witness further downside.
Despite losing significant values amid the broader market correction, large-cap stocks Uber Technologies, Inc. (UBER), NIO Inc. (NIO), Snap Inc. (SNAP), Lucid Group, Inc. (LCID), and Royal Caribbean Cruises Ltd. (RCL) continue to look overvalued, given their weak fundamentals and growth prospects. Therefore, these stocks are best avoided now.
Uber Technologies, Inc. (UBER)
UBER is a technology platform that offers multi-modal people transportation, ridesharing, restaurant food delivery, payment processing solutions, and freight carrier and shipper connections worldwide. The company operates through three segments ─ Mobility; Delivery; and Freight. It has a market capitalization of $47.89 billion.
On May 2, 2022, UBER partnered with Trapeze Group, an operating company of software business Volaris Group that develops and customizes intelligent transportation systems to provide transit agencies across North America with more options to manage fluctuating ridership and vehicle demand and optimize paratransit service. This allows transit agencies to partner with Trapeze to easily book Uber trips for their riders directly through the Trapeze PASS platform and enhance same-day trip booking and reporting.
UBER’s loss from operations came in at $482 million for the fiscal 2022 first quarter ended March 31, 2022, representing a 68.4% decline from the prior-year period. The company’s net loss came in at $5.93 billion for the quarter, indicating a 5930.7% year-over-year rise. Its loss per share came in at $3.04, up 4966.7% from the year-ago period. UBER had $4.18 billion in cash and cash equivalents as of September 30, 2021, indicating a 2.6% decline from the end of fiscal 2021.
Analysts expect the company’s EPS to be negative for fiscal 2022 ending December 31, 2022. Over the past month, the stock has declined 25.3% to close Friday’s trading session at $24.39.
In terms of forward EV/Sales, UBER is currently trading at 1.69x, 7.3% higher than the 1.57x industry average. UBER’s 5.13x forward Price/Book is 101.2% higher than the 2.55x industry average.
UBER’s weak prospects are reflected in its POWR Ratings. The stock has an overall D rating, equating to a Sell in our proprietary rating system. The POWR Ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.
UBER has a D grade for Value, Momentum, Sentiment, and Stability. To see additional POWR Ratings for UBER’s Growth and Quality, click here. Of the 79 stocks in the C-rated Technology - Services industry, UBER is ranked #63.
NIO Inc. (NIO)
Sometimes called ‘the Tesla of China,’ China-based NIO designs, manufactures, and sells smart and connected EVs integrated with next-generation technologies and artificial intelligence. The company’s products include its EP9 supercar and ES8 7-seater SUV. It has a $23.90 billion market capitalization.
Despite facing production halts and delivery delays due to supply chain volatilities and other constraints related to extended COVID-19 lockdowns in China, NIO delivered 5,074 vehicles, consisting of 4,381 premium smart electric SUVs 693 ET7s, the company’s flagship premium smart electric sedan, in April 2022. The company delivered 30,842 vehicles year-to-date in 2022, representing a 13.5% year-over-year rise.
NIO’s loss from operations for its fiscal 2021 fourth quarter ended December 31, 2021, came in at RMB2.05 billion ($321.40 million), representing a 135.1% rise from the prior-year period. While its non-GAAP net loss increased 29.4% year-over-year to RMB1.72 billion ($269.20 million), its non-GAAP loss per ADS decreased 82.8% to $0.16. As of December 31, 2021, the company had $2.41 billion in cash and cash equivalents, down 60.1% from the end of fiscal 2021.
Analysts expect the company’s EPS to remain negative in its fiscal 2022 ending December 31, 2022. Over the past month, the stock has declined 29.9% to end Friday’s trading session at $14.31.
NIO’s 2.06x forward EV/Sales is 88.1% higher than the 1.10x industry average. In terms of forward Price/Book, NIO is currently trading at 5.56x, 132.6% higher than the 2.39x industry average.
NIO’s POWR Ratings reflect this bleak outlook. The stock has an overall F rating, equating to a Strong Sell in our proprietary rating system.
NIO has an F grade for Stability and a D grade for Value, Sentiment, and Quality. Click here to see the additional ratings for NIO’s Momentum and Growth. The stock is ranked #60 of 69 stocks in the F-rated Auto & Vehicle Manufacturers industry.
Snap Inc. (SNAP)
With a $40.50 billion market cap, SNAP operates as a camera company and is known for its wide range of stickers, Bitmojis, and filters. The company also provides Spectacles, an eyewear product that connects with Snapchat and captures video from a human-eye perspective. It also provides advertising products that include AR and Snap ads.
On April 22, 2022, Tinuiti, a data-driven digital marketing agency specializing in full-service online marketing and the Triopoly of Alphabet Inc.’s (GOOGL) Google, Meta Platforms, Inc. (FB), Amazon.com, Inc. (AMZN), announced a strategic agreement with SNAP to become a strategic partner in the company's growing work with independent agencies. Tinuiti will gain access to the full suite of SNAP’s audience, products, and services to drive performant business results for clients. This will nurture SNAP’s partnership with Tinuiti.
For its fiscal 2022 first quarter ended March 31, 2022, SNAP’s operating loss decreased 10.6% year-over-year to $271.53 million. SNAP’s non-GAAP net loss came in at $39.29 million for the quarter, compared to a net income of $2.55 million in the prior-year period. Its non-GAAP loss per share came in at $0.02, versus a null EPS in the year-ago period. The company had $2.41 billion in cash and cash equivalents as of March 31, 2022, up 20.8% from the end of fiscal 2021.
Analysts expect the company’s EPS to be $0.34 for its fiscal year 2022, ending December 31, 2022, representing a 32% decline from the prior-year period. Over the past month, the stock has lost 28.6% and ended Friday’s trading session at $24.75.
SNAP’s 7.26x forward EV/Sales is 228.8% higher than the 2.21x industry average. In terms of forward Price/Book, SNAP is currently trading at 9.27x, which is 337.1% higher than the 2.12x industry average.
SNAP’s weak fundamentals are reflected in its POWR Ratings. The stock has an overall F rating, which equates to a Strong Sell in our proprietary rating system.
SNAP has a D grade for Value, Stability, Sentiment, and Quality. Click here to see additional ratings for SNAP’s Growth and Momentum. SNAP is ranked #66 of 71 stocks in the F-rated Internet industry.
Lucid Group, Inc. (LCID)
LCID is a technology and automotive company that develops electric vehicle (EV) technologies. The company designs, engineers, and builds electric vehicles, EV powertrains, and battery systems. As of December 31, 2021, it operates 20 retail studios in the United States. It has a $30.04 billion market capitalization.
On April 15, 2022, LCID introduced its newest Studio location in the Seaport District in Boston and announced the official opening of the Gate at Manhasset on Long Island later. Making its 26th Studio and service center locations open in North America, this studio opening further expands its footprint and should help increase its growing demand for electric vehicles.
For its fiscal 2022 first quarter ended March 31, 2022, LCID’s loss from operations came in at $597.53 million, representing a 100% year-over-year rise. The company’s net loss came in at $81.29 million for the quarter, indicating a 97.2% rise from the prior-year period. Its loss per share increased 99.9% year-over-year to $0.05. The company had $5.39 billion in cash and cash equivalents as of December 31, 2022, down 13.9% from the end of fiscal 2021.
The consensus EPS estimate for its fiscal 2022 ending December 31, 2022, is expected to remain negative. Over the past month, the stock has declined 18.3% and closed Friday’s trading session at $18.01.
In terms of forward EV/Sales, LCID is currently trading at 19.97x, 1723.6% higher than the 1.10x industry average. In terms of forward Price/Book, LCID is currently trading at 12.01x, 402.4% higher than the 2.39x industry average.
LCID’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.
The stock has an F grade for Value and Stability and a D grade for Sentiment and Quality. In addition to the POWR Ratings grades we have just highlighted, one can see the ratings for LCID’s Growth and Momentum here. LCID is ranked #59 in the F-rated Auto & Vehicle Manufacturers industry.
Royal Caribbean Cruises Ltd. (RCL)
With a market cap of $15.71 billion, RCL is a cruise company that operates cruises under the Royal Caribbean International, Celebrity Cruises, Azamara, and Silversea Cruises brands, which comprise a range of itineraries that call on approximately 1,000 destinations. As of February 25, 2022, it operated 61 ships.
On May 4, 2022, RCL’s Oasis-class cruise ship ‘Wonder of the Seas’, arrived in Barcelona, Spain, to set course for the Mediterranean on 7-night cruises from Barcelona and Rome beginning May 8. With the offering of exhilarating experiences, entertainment, restaurants, bars, and lounges to enjoy, RCL expects to witness advanced bookings in the coming months.
RCL’s operating loss for its fiscal year 2022 first quarter ended March 31, 2022, increased 6.2% year-over-year to $859.21 million. The company’s adjusted net loss came in at $1.16 billion, representing an 8% rise from the prior-year period. Its adjusted loss per share increased 2.9% year-over-year to $4.57. As of March 31, 2022, the company had $1.97 billion in cash and cash equivalents, down 27.1% from the end of fiscal 2021.
Analysts expect the company’s EPS to remain negative in its fiscal 2022 ending December 31, 2022. It missed the consensus EPS estimates in each of the trailing four quarters. Over the past month, the stock has retreated 24.8% in price to close yesterday’s trading session at $61.63.
RCL’s 4.13x forward EV/Sales is 277.1% higher than the 1.10x industry average. In terms of forward Price/Book, RCL is currently trading at 3.77x, 57.8% higher than the 2.39x industry average.
RCL’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 stock has an F grade for Value and Stability and a D grade for Sentiment and Quality. Click here to see the additional ratings for RCL’s Growth and Momentum. Among the four stocks in the F-rated Travel - Cruises industry, RCL is ranked #2.
UBER shares were trading at $23.75 per share on Monday afternoon, down $0.64 (-2.62%). Year-to-date, UBER has declined -43.36%, versus a -15.31% rise in the benchmark S&P 500 index during the same period.
About the Author: Sweta Vijayan
Sweta is an investment analyst and journalist with a special interest in finding market inefficiencies. She’s passionate about educating investors, so that they may find success in the stock market.
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