The main stock indices made their comeback yesterday. The S&P 500 gained 2.4%, while the Dow Jones and Nasdaq climbed 2.1% and 2.5%, respectively. Despite yesterday’s relief rally, ongoing issues, such as the high inflation for several decades and upcoming Federal Reserve interest rate hikes, should keep the stock market under tremendous pressure.
The Federal Reserve recently raised its policy rate by 75 basis points, the largest increase in nearly three decades to combat soaring inflation, and hinted at more aggressive policy tightening ahead. Therefore, the S&P 500 lost 5.8% last week, marking its biggest weekly loss since March 2020.
Goldman Sachs predicts that the odds of The U.S. economy’s tipping into recession over the next year is 30%compared to 15% previously.
In the current scenario, the fundamentally weak shares of Carnival Corporation & plc (CCA), NIO Inc. (NIO) and Shopify Inc. (STORE) have fallen more than 30% since the start of the year and are not expected to rebound anytime soon. Therefore, it is better to avoid these stocks now.
Carnival Corporation & plc (CCA)
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 (UK) and Cunard brands.
Last month, CCL closed its private offering in an aggregate principal amount of $1.0 billion of 10.5% senior unsecured notes due 2030. The senior unsecured notes will pay interest half-yearly on June 1 and December 1 of each year, starting December 1, 2022, at the rate of 10.5% per annum and are repayable starting June 1, 2025.
The Company intends to use the net proceeds of the offering to make scheduled debt principal payments in fiscal 2023 and for general corporate purposes.
For the first quarter ending February 28, 2022, the CCL operating loss is $1.49 billion. Adjusted net loss was $1.88 billion, while its loss per share was $1.66 for the period. Net cash used in operating activities was $1.21 billion for the period.
Analysts expect CCL’s EPS to remain negative in the second quarter ending May 2022. The company’s shares have fallen 52.3% year-to-date and 58.7% during of the past nine months.
CLC POWR Rankings fit into these gloomy prospects. The stock has an overall rating of F, which translates to a strong sell in our proprietary rating system. POWR ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
CCL is rated F for quality and stability and D for value. In category F Travel – Cruises industry, it is ranked #3 out of 4 stocks.
To view additional POWR ratings for Growth, Sentiment and Momentum for CCL, Click here.
NIO Inc. (NIO)
Based in Shanghai, China, NIO designs, develops, manufactures and sells smart electric vehicles. It offers five-, six-, and seven-seat electric SUVs and smart electric sedans. The company is also engaged in providing energy packages and services to its users; design and technological development activities.
In the first quarter ending March 31, 2022, NIO’s operating loss increased 639.7% year-on-year to RMB 2.19 billion ($327.02 million). Its adjusted net loss rose 269.3% from its value a year ago at RMB 1.31 billion ($195.68 million), while its adjusted loss per share rose 243.5%. % from the prior year quarter to RMB 0.79.
The consensus EPS estimate is expected to remain negative in the second quarter ending June 2022. The stock is down 55.7% year-to-date and 40.9% over the past nine months.
NIO’s weak fundamentals are reflected in its POWR ratings. The stock has an overall F rating, which equates to a strong sell in our POWR rating system. The stock also has an F rating for growth and stability and a D for sentiment. In dimension F Automobile and vehicle manufacturers industry, it is ranked #62 out of 65 stocks.
In addition to the POWR Ratings I just highlighted, you can see NIO’s Momentum, Value, and Quality ratings. here.
Shopify Inc. (STORE)
Based in Ottawa, Canada, SHOP provides an e-commerce platform and services in Canada, the United States, Europe, the Middle East, Africa, Asia-Pacific and Latin America. The Company’s platform enables merchants to view, manage, market and sell its products through various sales channels.
In the first quarter ended March 31, 2022, SHOP’s operating loss was $97.98 million, compared to revenue of $118.90 million in the previous quarter. Net loss was $1.47 billion, compared to net profit of $1.26 billion in the prior period.
The consensus EPS estimate of $0.26 represents a year-over-year decline of 88.3% for the second quarter ending June 2022. The company’s shares have fallen 77% since inception of the year and 78% over the last nine months.
SHOP’s poor outlook is also apparent in its POWR ratings. The stock has an overall F rating, which equates to a strong sell in our POWR rating system. It has an F rating for sentiment and a D for stability and growth. SHOP is ranked No. 31 out of 31 stocks in the D rating Internet Services industry.
Click here to see additional POWR ratings for SHOP (Quality, Value and Momentum).
CCL shares were trading at $9.60 per share Wednesday morning, up $0.03 (+0.31%). Year-to-date, the CCL is down -52.29%, compared to a -20.86% rise in the benchmark S&P 500 over the same period.
About the Author: Spandan Khandelwal
Spandan’s is a financial journalist and investment analyst specializing in the stock market. Through its ability to interpret financial data, it aims to help investors assess a company’s fundamentals before investing. After…