The stock market has witnessed heightened volatility since the beginning of 2022. Moreover, the Federal Reserve recently raised benchmark interest rates by 75 basis points and indicated that it would maintain its hawkish stance to fight rampant inflation. Many economists expect the persistent monetary tightening to push the economy into a recession.
Renowned investor Cathie Wood’s ARK Invest ETFs have been hit hard this year amid the intense market rout. The ARK Innovation ETF (ARKK) has plunged 44.2% over the past months and 68% over the past year. Wood has been receiving backlash due to a lack of diversification in her flagship fund. This has now become the key factor for the fund’s underperformance.
As of August, the fund was concentrated on tech growth and science stocks. Ark’s latest 13F filing shows that tech stocks made up nearly 34% of the portfolio. Furthermore, earlier this year, citing the poor risk management and wretched performance, Morningstar analysts downgraded its stance on Wood’s flagship ARKK from ‘Neutral’ to ‘Negative.’
Since the stock market is expected to remain under pressure in the near term, we think it could be wise to stay away from fundamentally weak stocks Roblox Corporation (RBLX), DraftKings Inc. (DKNG), Teladoc Health, Inc. (TDOC), Intellia Therapeutics, Inc. (NTLA), and Verve Therapeutics, Inc. (VERV) that Wood is loading.
Roblox Corporation (RBLX)
RBLX operates an online entertainment platform. The company provides Roblox Studio, a free toolset for developers and creators to build, publish, and manage 3D content; Roblox Client, an application that allows exploring the 3D digital world; Roblox Cloud, which provides cloud-based services and infrastructure; and Roblox Education for learning experiences. The stock has nearly 1.36% ARK ownership.
In the fiscal 2022 second quarter ended June 30, RBLX’s total cost and expenses increased 27.5% year-over-year to $761.47 million. Its loss from operations widened 19.1% year-over-year to $170.27 million. The company reported adjusted EBITDA of $54.64 million, down 69.7% from the prior-year period.
In addition, net loss and loss per share attributable to common stockholders came in at $176.44 million and $0.30, worsening 25.9% and 20% year-over-year, respectively. Its free cash outflow was $57.32 million, compared to an inflow of $168.02 million in the year-ago quarter.
The consensus loss per share estimate of $0.31 for the fiscal 2022 third quarter ending September 2022 indicates a widening of 136.1% year-over-year. Also, analysts expect the company’s loss per share for the fiscal 2022 and 2023 to worsen by 24.1% and 11.2% year-over-year to $1.20 and $1.34, respectively.
The stock has declined 64% year-to-date and 55.6% over the past year to close the last trading session at $35.55.
RBLX’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 POWR Ratings assess stocks by 118 different factors, each with its own weighting.
RBLX has an F grade for Stability and a D grade for Growth, Value, Momentum, and Sentiment. Within the 22-stock Entertainment - Toys & Video Games industry, it is ranked the last. To see additional POWR Ratings (Quality) for RBLX, click here.
DraftKings Inc. (DKNG)
DKNG is a digital sports entertainment and gaming company that operates in the United States and internationally. The company operates through two segments: Business-to-Consumer; and Business-to-Business. DKNG provides online consumer products with fantasy sports, sports betting, and iGaming opportunities. DKNG has about 4.9% ARK ownership.
For the fiscal 2022 second quarter ended June 30, 2022, DKNG's adjusted operating expenses increased 48.6% year-over-year to $584 million. The company's loss from operations amounted to $308.92 million for the quarter. Its adjusted EBITDA was negative $118.13 million, widening 234% year-over-year. Also, its net loss and adjusted loss per share came in at $217.10 million and $0.29, respectively.
Analysts expect DKNG's loss per share for the fiscal 2022 third quarter (ending September 2022) to come in at $1.05. Also, the company’s loss per share for the current and next year is expected to come in at $3.19 and $2.16, respectively. The company missed the consensus EPS estimates in three of the trailing four quarters, which is disappointing.
DKNG has slumped 21.8% over the past six months and 71.6% over the past year to close the last trading session at $14.59.
It’s no surprise that DKNG has an overall rating of F, which translates to Strong Sell in our POWR Ratings system. It has a grade of F for Stability and Quality. It also has a D grade for Value.
DKNG is ranked last in the D-rated 27-stock Entertainment-Casinos/Gambling industry. To see the additional POWR Ratings for Growth, Momentum, and Sentiment for DKNG, click here.
Teladoc Health, Inc. (TDOC)
TDOC offers virtual healthcare services internationally. The company provides a portfolio of services and solutions covering episodic, chronic, and medical conditions. TDOC offers programs and services, including specialty care telehealth solutions, chronic condition management, mental health solutions, and platform and program services. TDOC has 11.43% ARK ownership.
TDOC’s total expenses increased 533.7% year-over-year to $3.69 billion in the fiscal 2022 second quarter ended June 30, 2022. The company's loss from operations widened by 3,822.3% year-over-year to $3.10 billion. Its adjusted EBITDA declined 30.1% from the prior-year quarter to $6.67 billion.
Furthermore, the company's net loss widened by 2,217.7% from the prior-year period to $3.10 billion, while its net loss per share came in at $19.22, worsening by 2,134.9% year-over-year.
Analysts expect TDOC's loss per share for the fiscal 2022 fourth quarter (ending December 2022) to widen 134.9% year-over-year to $0.15. The company is estimated to incur losses in 2022 and 2023. The company missed the consensus EPS estimates in each of the trailing four quarters.
Shares of TDOC have plunged 62.2% over the past six months and 72.2% year-to-date to close the last trading session at $26.42.
TDOC's POWR Ratings reflect its poor prospects. The company has an overall rating of D, which translates to Sell in our proprietary rating system.
The stock has an F grade for Sentiment and a D for Value, Stability, and Momentum. It is ranked #78 of 80 stocks in the D-rated Medical - Services industry. To see additional POWR Ratings (Growth, Value, and Momentum) for TDOC, click here.
Intellia Therapeutics, Inc. (NTLA)
NTLA is a genome editing company that focuses on developing therapeutics using Clustered, Regularly Interspaced Short Palindromic Repeats/CRISPR-associated nine technologies. NTLA's lead in vivo candidates includes NTLA-2001 to treat transthyretin amyloidosis and NTLA-2022 to treat hereditary angioedema. Its ex vivo pipeline includes NTLA-5001 to treat acute myeloid leukemia. NTLA has 10.7% ARK ownership.
NTLA's operating expenses increased 48.7% year-over-year to $112.33 million in the fiscal 2022 second quarter ended June 30. The company reported an operating loss of $98.30 million, widening 42.4% year-over-year. In addition, its net loss and net loss per share worsened by 46.3% and 31.7% year-over-year to $100.68 million and $1.33, respectively.
Analysts expect NTLA's revenue for the fiscal 2022 fourth quarter (ending December 2022) to come in at $10.39 million, indicating a 17.4% decline year-over-year. The company’s loss per share for the same quarter is expected to worsen 26.3% year-over-year to $1.38. Also, analysts expect the company to incur losses in the current and next years.
The stock has declined 54.5% year-to-date and 63.3% over the past year to close the last trading session at $54.20.
NTLA's POWR Ratings reflect its poor prospects. The stock has an overall D rating, equating to Sell in our proprietary rating system.
NTLA has a D grade for Stability, Momentum, Sentiment, and Value. Within the F-rated Biotech industry, it is ranked #368 of 393 stocks. Click here to see NTLA’s POWR Ratings for Growth and Quality.
Verve Therapeutics, Inc. (VERV)
VERB develops a Software-as-a-Service (SaaS) applications platform. The company’s platform comprises a suite of sales-enabling business software products marketed on a subscription basis. VERB provides next-generation CRM lead generation, sales enablement, and video marketing software applications to sales-based organizations. The stock has 5.42% ARK ownership.
VERB’s loss from operations widened 148.7% year-over-year to $42.19 million in the fiscal 2022 second quarter ended June 30. Its net loss stood at $40.95 million for the quarter, while its net loss per common share attributable to common stockholders came in at $0.84.
As of June 30, 2022, the company’s cash, cash equivalents, and marketable securities were $293.56 million, compared to $360.44 million as of December 31, 2021.
Analysts expect VERB’s loss per share to come in at $0.07 in the current quarter, ending September 2022. Also, the company is expected to incur losses at least until next year. VERB missed the consensus revenue estimates in each of the trailing four quarters.
Shares of VERB have slumped 54.8% over the past six months and 64.1% year-to-date to close the last trading session at $0.47.
VERB’s POWR Ratings reflect its poor outlook. The stock has an overall D rating, which equates to a Sell in our proprietary rating system. It also has a D grade for Quality, Growth, Momentum, Sentiment, and Stability.
Among the 393 stocks in the F-rated Biotech industry, VERB is ranked #360. To see VERB’s POWR Ratings for Value, click here.
RBLX shares rose $1.11 (+3.12%) in premarket trading Tuesday. Year-to-date, RBLX has declined -65.54%, versus a -22.41% rise in the benchmark S&P 500 index during the same period.
About the Author: Mangeet Kaur Bouns
Mangeet’s keen interest in the stock market led her to become an investment researcher and financial journalist. Using her fundamental approach to analyzing stocks, Mangeet’s looks to help retail investors understand the underlying factors before making investment decisions.
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