Following the release of lower-than-expected CPI data for November, the Fed raised the interest rate by 0.5%, as expected. However, the central bank indicated it would keep raising rates next year. Since the rising rates could slow the economy and keep the market volatile, avoiding fundamentally weak stocks Boeing (BA), ChargePoint (CHPT), ContextLogic (WISH), and Mullen (MUKN) could be wise. Keep reading….
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The broader market has taken a beating this year due to various macroeconomic and geopolitical headwinds, including sky-high inflation, the economic fallout from Russia’s invasion of Ukraine, and increasing recessionary fears. The S&P 500 is down 16.2% year-to-date, while the Nasdaq Composite has plunged 28.6%.
The Federal Reserve yesterday increased its benchmark interest rate by 50 basis points to the highest level in 15 years, signaling that the fight against inflation is not over despite some recent promising signs. With inflation cooling considerably in November, this month’s interest rate hike broke a string of four straight 75-basis-point hikes.
The central bank also indicated that it will deliver more rate hikes next year, with no reductions until 2024, even if the economy slips toward a recession. Based on the median forecast, the Fed expects to raise interest rates as high as 5.1% before the central bank ends its fight against stubborn inflation.
Given an uncertain economic and market backdrop, investors are advised to reduce their exposure to fundamentally weak stocks The Boeing Company (BA), ChargePoint Holdings, Inc. (CHPT), ContextLogic Inc. (WISH), and Mullen Automotive, Inc. (MULN).
The Boeing Company (BA)
BA designs, manufactures, and sells commercial jetliners, military aircraft, satellites, missile defense systems, human space flight, and launch systems and services worldwide. It operates through Commercial Airplanes (BCA); Defense, Space & Security (BDS); Global Services (BGS); and Boeing Capital (BCC) segments.
For the fiscal third quarter ended September 30, 2022, BA’s total cost and expenses increased 23.7% year-over-year to $16.78 billion. The company’s non-GAAP core operating loss came in at $3.08 billion, compared to non-GAAP core operating earnings of $59 million in the previous year’s period. The net loss attributable to BA shareholders worsened by 2,904.6% from the prior-year period to $3.28 billion.
In addition, the company’s non-GAAP core loss per share came in at $6.18, indicating a widening of 930% year-over-year.
In terms of trailing-12-month gross profit margin, BA’s 1.54% is 94.7% lower than the 29.09% industry average. And its trailing-12-month EBITDA margin of negative 4.36% compares to the industry average of 13.03%. Likewise, the stock’s trailing-12-month net income margin of negative 13.75% compares to the 6.75% industry average.
Analysts expect the company to report a loss per share of $8.60 for the fiscal year ending December 2022. Moreover, the company has missed its consensus EPS and revenue estimates in each of the trailing four quarters. The stock has declined 9.4% year-to-date to close the last trading session at $188.25.
BA’s POWR Ratings reflect this bleak outlook. The stock has an overall rating of D, which equates to a Sell in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
BA has a D grade for Stability. It is ranked #54 of 73 stocks within the Air/Defense Services industry.
Click here to see the additional ratings for BA (Growth, Value, Momentum, Quality, and Sentiment).
ChargePoint Holdings, Inc. (CHPT)
CHPT provides electric vehicle (EV) charging networks and solutions in the United States and internationally. It offers a portfolio of hardware, software, and services for commercial, fleet, and residential customers.
For the fiscal 2023 third quarter ended October 31, 2022, CHPT’s total revenue increased 92.7% year-over-year to $125.34 million. However, the company’s bottom line declined significantly. Its operating expenses increased 30.2% from the year-ago value to $105.96 million. Its loss from operations widened 27.5% year-over-year to $83.28 million.
Furthermore, CHPT’s non-GAAP pre-tax net loss was $56.40 million, compared to $47.30 million in the prior year’s quarter. Also, its net loss per share came in at $0.25, widening 19.1% year-over-year.
In terms of trailing-12-month gross profit margin, CHPT’s 17.85% is 38.7% lower than the 29.09% industry average. Also, the stock’s trailing-12-month ROCE, ROTC, and ROTA of negative 70.69%, 33.28%, and 32.64% compare to industry averages of 14.19%, 6.76%, and 5.31%, respectively.
Analysts expect CHPT to incur a loss of $0.15 per share for the current quarter (ending January 2023). Likewise, the company’s loss per share is expected to widen by 16.3% from the previous year to $0.71. Shares of CHPT have slumped 43.3% year-to-date and 42.3% over the past year to close the last trading session at $11.26.
CHPT’s POWR Ratings are consistent with its bleak prospects. 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 Value and Stability and a D for Quality.
We also have graded CHPT for Growth, Momentum, and Sentiment. Click here to access all CHPT’s ratings. It is ranked #81 out of 90 stocks in the Industrial – Equipment industry.
ContextLogic Inc. (WISH)
WISH is a mobile electronic commerce company. The company provides a discovery-based shopping platform that connects merchants’ products to users based on user preferences. Its personalized product feed enables the users to discover products to purchase by scrolling through its mobile application and browsing.
The company’s monthly average users (MAUs) declined 60% year-over-year to 24 million during the third quarter of fiscal 2022. Its LTM (Last Twelve Months) active users also fell 65.2% year-over-year to 16 million.
In the fiscal third quarter ended September 30, 2022, WISH’s revenue declined 66% year-over-year to $125 million, while its gross profit decreased 79.6% year-over-year to $34 million. Its adjusted EBITDA loss widened 216.7% year-over-year to $95 million. Cash outflows from operating activities stood at $100 million for the quarter.
In addition, WISH’s net loss worsened by 93.7% year-over-year to $124 million. Likewise, its loss per share widened 80% year-over-year to $0.18. The company’s total assets declined 29% to $911 million, compared to $1.28 billion for the fiscal year ended December 31, 2021.
WISH’s trailing-12-month EBITDA margin of negative 42.47% compares to the industry average of 7.89%. Also, the stock’s trailing-12-month net income margin of negative 45.05% compares to the 5.05% industry average.
The consensus revenue estimate of $152.02 million for the fourth quarter of the fiscal year (ending December 31, 2022) indicates a 47.4% year-over-year decline. Also, analysts expect the company’s loss per share to worsen 379.7% year-over-year to $0.15. The company has missed the consensus revenue estimates in each of the trailing four quarters, which is disappointing.
Furthermore, analysts expect WISH’s revenue for the current fiscal year to decline 71.6% to $592.71 million. Also, the company is expected to report a loss per share of $0.45 for the same period, indicating a widening of 38.9% year-over-year.
For the quarter ending December 31, 2022, WISH’s loss per share is expected to widen 378.5% year-over-year to $0.15. Its revenue for the current quarter is expected to decline 48% year-over-year to $150.40 million. The stock has declined 80.2% year-to-date to close the last trading session at $0.64.
WISH’s POWR Ratings reflect its weak fundamentals and poor prospects. The stock has an overall F rating, which translates to a Strong Sell in our proprietary rating system.
It has an F grade for Stability and a D for Growth and Quality. Within the F-rated Internet industry, it is ranked #56 out of 59 stocks. To see the other ratings of WISH for Value, Momentum, and Sentiment, click here.
Mullen Automotive, Inc. (MULN)
MULN is an automotive company that manufactures and distributes premium electric vehicles (EVs) in the United States. It also operates CarHub, a digital platform that leverages AI to offer an interactive solution for buying, selling, and owning a car. In addition, the company offers battery technology and emergency point-of-care solutions.
MULN’s losses from operations widened 184.5% year-over-year to $18.22 million for the three months that ended June 30, 2022. Its pretax loss widened 82.6% from the prior-year period to $59.47 million. The company’s net loss worsened by 289.9% year-over-year to $59.47 million. Moreover, its net loss per share came in at $0.16.
MULN’s trailing-12-month ROTC of negative 618.14% compares to the industry average of 6.59%. And the stock’s trailing-12-month ROTA of negative 169.94% compares to the 4.38% industry average.
Over the past year, the stock has lost 95.3% to close the last trading session at $0.26. Also, it has declined 75.4% over the past six months.
MULN’s weak fundamentals are reflected in its POWR Ratings. It has an overall F rating, equating to a Strong Sell in our POWR Ratings system.
The stock also has an F grade for Value and Stability and a D for Sentiment and Quality. MULN is ranked #57 out of 64 stocks in the D-rated Auto & Vehicle Manufacturers.
Click here to access MULN’s ratings for Growth and Momentum.
BA shares fell $2.15 (-1.14%) in premarket trading Thursday. Year-to-date, BA has declined -6.49%, versus a -14.94% 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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