Since the beginning of the year, the stock markets have declined due to negative investor sentiment about surging inflation, Russia’s invasion of Ukraine, rising crude oil prices, and the possibility of aggressive interest rate increases by the Federal Reserve to tame the multi-decade high inflation. However, the markets did rebound briefly from their lows before negative news fostered fresh selloffs.
Many economists expect the economy to witness recessionary pressure amid soaring inflation and a tight labor market. The latest U.S. inflation data has revealed that inflation rose 8.5% in March, skyrocketing to its highest level since December 1981. The U.S. economy added 431,000 jobs in March as the labor market became tight. Oil prices continued hovering above $100 per barrel--high crude oil prices have often precipitated a recession. Due to a confluence of these factors, the stock market is expected to remain under pressure in the near term.
Given this backdrop, we think it could be wise to avoid fundamentally weak stocks Coupang, Inc. (CPNG), XPeng Inc. (XPEV), On Holding AG (ONON), Roku, Inc. (ROKU), and Sunrun Inc. (RUN), which are each trading at premiums to their peers. These stocks have underperformed in the past and we think will likely witness a downtrend in the near term.
Coupang, Inc. (CPNG)
Headquartered in Seoul, South Korea, CPNG provides e-commerce services. The company offers home goods and decoration, apparel and beauty products, fresh food and grocery, sporting goods, electronics, restaurant order and delivery, travel and everyday consumables, and other products and services.
CPNG’s net loss widened 233% year-over-year to $1.54 billion for its fiscal year ended December 31, 2021. The company’s adjusted EBITDA loss widened 109.3% year-over-year to $747.63 million. Also, its total operating costs and expenses increased 59.4% year-over-year to $19.90 billion.
In terms of forward P/S and EV/S, CPNG’s respective 1.29x and 1.25x are higher than the 0.92x and 1.11x industry averages. Furthermore, its 17.73x forward P/B is 616.7% higher than the 2.47x industry average.
Analysts expect CPNG’s EPS for the quarter ending June 30, 2022, to decline 7.7% year-over-year to $0.14. Its EPS is expected to remain negative in its fiscal year 2022 and 2023. The stock missed the Street’s EPS estimates in three of the trailing four quarters. And over the past year, the stock has declined 62.4% in price to close the last trading session at $16.96.
CPNG’s weak fundamentals are reflected in its POWR Ratings. It has an overall D rating, which translates 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.
It has an F grade for Growth and a D grade for Value and Quality. It is ranked #61 of 71 stocks in the F-rated Internet industry. Click here to see the other ratings of CPNG for Momentum, Stability, and Sentiment.
XPeng Inc. (XPEV)
Headquartered in Guangzhou, XPEV is one of China’s leading electric vehicle manufacturers. The company’s offerings include SUVs under the G3 name and sports sedans under the P5 and P7 names. It also provides sales contracts, supercharging, ride-hailing services, and vehicle leasing.
For its fiscal fourth quarter, ended Dec.31, 2021, XPEV’s non-GAAP net loss widened 68.2% year-over-year to RMB1.19 billion ($186.82 million). The company’s non-GAAP loss per share widened 48.4% year-over-year to RMB1.41. Also, its non-GAAP loss from operations widened 123.7% year-over-year to RMB2.34 billion ($367.37 million).
In terms of forward P/S and EV/S, XPEV’s respective 3.32x and 2.61x are higher than the 0.92x and 1.11x industry averages. Furthermore, its 4.55x forward P/B is 83.9% higher than the 2.47x industry average.
For the quarter ending March 31, 2022, XPEV’s EPS is expected to decline 114.3% year-over-year to $0.30. Its EPS for its fiscal years 2022 and 2023 is expected to remain negative. Its EPS is expected to decrease 8.8% per annum over the next five years. The stock has declined 48.7% in price year-to-date to close the last trading session at $25.78.
XPEV’s POWR Ratings are consistent with this bleak outlook. According to our rating system, it has an overall rating of F, which translates to Strong Sell.
It has an F grade for Stability and a D grade for Growth, Value, and Quality. Within the F-rated Auto & Vehicle Manufacturers industry, it is ranked #53 out of 69 stocks. To see the other ratings of XPEV for Momentum and Sentiment, click here.
Click here to checkout our Electric Vehicle Industry Report for 2022
On Holding AG (ONON)
Headquartered in Zurich, Switzerland, ONON develops and distributes sports products worldwide. It offers athletic footwear, apparel, and accessories and produces and distributes performance sports products through independent retailers and global distributors.
ONON’s net loss widened 518.4% year-over-year to CHF170.22 million ($182.66 million) for the fourth quarter, ended Dec. 31, 2021. The company’s cost of sales increased 51.5% year-over-year to CHF294.30 million ($315.80 million). Also, its selling, general, and administrative expenses increased 130.2% year-over-year to CHF571.37 million ($613.12 million).
In terms of forward P/S and EV/S, ONON’s respective 6.93x and 6.20x are higher than the 0.92x and 1.11x industry averages. Also, its 8.09x forward P/B is 226.9% higher than the 2.47x industry average.
Analysts expect ONON’s EPS for the quarter ending March 31, 2022, to be negative. The stock has declined 37.1% year-to-date to close the last trading session at $23.75.
ONON’s weak fundamentals are reflected in its POWR Ratings. According to our rating system, it has an overall F rating, which translates to Strong Sell.
It has an F grade for Growth and Value and a D grade for Stability, Sentiment, and Quality. It is ranked last among 36 stocks in the Athletics & Recreation industry. Click here to see ONON’s rating for Momentum.
Roku, Inc. (ROKU)
San Jose, Calif.-based ROKU operates a television streaming platform. Its streaming players and television-related audio devices are available across the United States through direct retail sales and licensing arrangements with service operators. The company enables customers to discover and access various streaming content and content publishers to reach its user base of active accounts.
For its fiscal fourth quarter, ended Dec. 31, 2021, ROKU’s total operating expenses increased 49% year-over-year to $358.28 million. The company’s income from operations declined 67.2% year-over-year to $21.36 million. And its adjusted EBITDA decreased 23.5% year-over-year to $86.73 million.
In terms of forward P/S and EV/S, ROKU’s respective 4.13x and 3.76x are higher than the industry 1.57x and 2.12x averages. Furthermore, its 5.43x forward P/B is 125% higher than the 2.41x industry average.
For the quarter ending June 30, 2022, ROKU’s EPS is expected to decline 171.2% year-over-year to $0.37. Its EPS for its fiscal year 2022 is expected to remain negative. Over the past nine months, the stock has declined 73.7% in price to close the last trading session at $113.58.
ROKU’s POWR Ratings reflect its poor prospects. It has an overall rating of D, which translates to a Sell in our proprietary rating system.
It has an F grade for Stability and a D grade for Growth, Value, and Sentiment. Within the D-rated Consumer Goods industry, it is ranked #55 of 61 stocks. To see the other ratings of ROKU for Momentum and Quality, click here.
Sunrun Inc. (RUN)
RUN is engaged in developing, installing, selling, ownership, and maintaining residential solar energy systems. The San Francisco, Calif.-based company provides battery storage and solar energy systems to its customers and sells its services to commercial developers through its multi-family and new homes offerings. Its products include solar rooftop panel systems, solar power batteries, battery retrofits, electric vehicle chargers, and others.
RUN’s total operating expenses increased 64% year-over-year to $2.27 billion for its fiscal year ended Dec. 31, 2021. The company’s loss from operations widened 43.2% year-over-year to $666.18 million. Also, its net loss widened 56.3% year-over-year to $980.53 million.
In terms of forward P/S and EV/S, RUN’s respective 2.93x and 7.30x are higher than the 1.31x and 1.64x industry averages. Its 382.96x forward P/CF is 2,747.9% higher than the industry average of 13.45x.
Analysts expect RUN’s EPS for the quarter ending March 31, 2022, to decline 41.7% year-over-year to $0.17. Its EPS for its fiscal year 2022 and 2023 is expected to remain negative. It failed to surpass consensus EPS estimates in three of the trailing four quarters. And over the past nine months, the stock has declined 53% to close the last trading session at $25.62.
RUN’s weak fundamentals are reflected in its POWR Ratings. According to our rating system, it has an overall F rating, which translates to Strong Sell.
It has an F grade for Value, Stability, and Quality and a D grade for Growth and Sentiment. It is ranked #18 of 19 stocks in the F-rated Solar industry. Click here to see the other rating of RUN for Momentum.
CPNG shares were trading at $17.29 per share on Wednesday morning, up $0.33 (+1.95%). Year-to-date, CPNG has declined -41.15%, versus a -7.14% rise in the benchmark S&P 500 index during the same period.
About the Author: Dipanjan Banchur
Since he was in grade school, Dipanjan was interested in the stock market. This led to him obtaining a master’s degree in Finance and Accounting. Currently, as an investment analyst and financial journalist, Dipanjan has a strong interest in reading and analyzing emerging trends in financial markets.
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