Market volatility is evident from the CBOE Volatility Index’s 56.6% year-to-date gains ahead of July’s Federal rate hike. According to Leon Cooperman, chairman of Omega Advisors, stocks could fall 40% from their peak. And he expects the U.S. economy will likely witness a recession in 2023.
Moreover, deteriorating consumer confidence and deceleration in consumer spending are concerning. Gold IRA Guide Survey recently discovered that 70.5% of U.S. consumers believe the global economy will hit a recession in 2022.
Given the backdrop, we think it could be wise to short, liquidate or avoid fundamentally weak stocks Netflix, Inc. (NFLX), Etsy, Inc. (ETSY), Align Technology, Inc. (ALGN), PayPal Holdings, Inc. (PYPL), and Bath & Body Works, Inc. (BBWI) now.
Netflix, Inc. (NFLX)
NFLX provides entertainment services. It offers TV series, documentaries, feature films, and mobile games across various genres and languages. It allows members to receive streaming content through a host of internet-connected devices.
On June 14, 2022, analyst Matthew Harrigan cut his rating on NFLX to Sell from Hold.
NFLX’s revenues came in at $7.87 billion for the first quarter that ended March 31, 2022, up 9.8% year-over-year. However, its net income decreased 6.4% year-over-year to $1.60 billion, while its EPS came in at $3.53, down 5.9% year-over-year. Also, its cash, cash equivalents, and restricted cash came in at $6.03 billion, down 28.5% year-over-year.
NFLX’s forward EV/S of 2.92x is 51.2% higher than the industry average of 1.93x. Its forward P/S of 2.44x is 88.6% higher than the industry average of 1.29x.
NFLX’s EPS is expected to fall 3.6% year-over-year to $10.84 in 2022. The stock has lost 70.6% year-to-date to close the last trading session at $177.34.
NFLX’s POWR Ratings reflect its poor prospects. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
The stock has a D grade for Momentum. Click here to access the additional POWR Ratings for NFLX (Growth, Value, Stability, Sentiment, and Quality). NFLX is ranked #17 out of 66 stocks in the F-rated Internet industry.
Etsy, Inc. (ETSY)
ETSY operates two-sided online marketplaces that connect buyers and sellers, primarily in the United States, the United Kingdom, Germany, Canada, Australia, France, and India. Its primary marketplace is Etsy.com, connecting artisans and entrepreneurs with various consumers.
On June 27, 2022, Needham downgraded ETSY from Buy to Hold.
ETSY’s revenue came in at $579.27 million for the first quarter that ended March 31, 2022, up 5.2% year-over-year. However, its gross profit decreased marginally year-over-year to $406.27 million. Moreover, its net income came in at $86.11 million, down 40.1% year-over-year, while its EPS came in at $0.60, down 40% year-over-year.
ETSY’s forward EV/S of 4.90x is 361.3% higher than the industry average of 1.06x. Its forward P/S of 4.34x is 417.1% higher than the industry average of 0.84x.
ETSY’s EPS is estimated to decline 33.5% year-over-year to $2.26 in 2022. The stock has lost 60.7% year-to-date to close the last trading session at $86.07.
ETSY has an overall D grade, equating to Sell in our POWR Ratings system. Also, it has an F grade for Sentiment and a D for Growth, Value, and Stability.
Click here to access the ETSY ratings for Momentum and Quality. It is ranked #52 in the Internet industry.
Align Technology, Inc. (ALGN)
The medical device company, ALGN designs, manufactures, and markets Invisalign clear aligners, iTero intraoral scanners, services for orthodontists and general practitioner dentists, and restorative and aesthetic dentistry. It operates in two segments, Clear Aligner; and Scanners and Services.
On June 15, 2022, Morgan Stanley slashed their price objective on ALGN from $524.00 to $479.00.
For the first quarter that ended March 31, 2022, ALGN’s net revenues came in at $973.22 million, up 8.8% year-over-year. However, its non-GAAP net income came in at $168.70 million, down 15% year-over-year, while its non-GAAP EPS came in at $2.13, down 14.5% year-over-year.
In terms of forward EV/S, ALGN’s 4.39x is 12.5% higher than the industry average of 3.90x. Its forward P/S of 4.62x is higher than the industry average of 4.56x.
In addition, its cash, cash equivalents, and restricted cash came in at $926.87 million, down 18.1% year-over-year.
ALGN’s EPS is expected to decrease 11.2% year-over-year to $9.96 in 2022. The stock has lost 62% year-to-date to close the last trading session at $249.48.
ALGN’s POWR Ratings are consistent with this bleak outlook. The stock has a D grade for Growth and Momentum.
We also have graded ALGN for Value, Stability, Sentiment, and Quality. Click here to access all of ALGN’s ratings. It is ranked #66 out of 149 stocks in the D-rated Medical - Devices & Equipment industry.
PayPal Holdings, Inc. (PYPL)
PYPL operates a technology platform that enables digital payments on behalf of merchants and consumers worldwide. It provides payment solutions under the names of PayPal, Credit, Braintree, Venmo, Xoom, Zettle, Hyperwallet, Honey, and Paidy.
The company is currently dealing with a series of lawsuits filed against it. Recently two California residents and a Chicago businessman sought to pursue a class-action case against PYPL on behalf of all account holders having their money placed on hold.
PYPL’s net revenues came in at $6.48 billion for the first quarter that ended March 31, 2022, up 7.5% year-over-year. However, its non-GAAP net income came in at $1.03 billion, down 29.1% year-over-year, while its non-GAAP EPS came in at $0.88, down 27.9% year-over-year. Furthermore, its free cash flow came in at $1.05 billion, down 31.6% year-over-year.
PYPL’s forward EV/S of 3.08x is 13.9% higher than the industry average of 2.70x. Its forward P/S of 2.88x is 5.6% higher than the industry average of 2.73x.
PYPL’s EPS is estimated to decline 15.9% year-over-year to $3.87 in 2022. The stock has lost 62.6% year-to-date to close the last trading session at $70.47.
PYPL has an overall grade of D, translating to Sell in our proprietary rating system. Also, the stock has a D grade for Sentiment.
Click here to access the additional POWR Ratings for PYPL (Growth, Value, Momentum, Stability, and Quality). It is ranked #39 out of 46 stocks in the D-rated Consumer Financial Services industry.
Bath & Body Works, Inc. (BBWI)
BBWI is a specialty retailer of home fragrance, body care, soap, and sanitizer products. It sells products under Bath & Body Works, White Barn, and other brand names through specialty retail stores and websites in the United States and Canada, as well as through international stores.
On June 29, 2022, J.P. Morgan analysts downgraded BBWI.
BBWI’s net sales came in at $1.45 billion for the first quarter that ended April 30, 2022, down marginally year-over-year. Its net income came in at $154.91 million, down 44% year-over-year, while its EPS came in at $0.64, down 34% year-over-year.
BBWI’s forward EV/S of 1.44x is 35.8% higher than the industry average of 1.06x. Its trailing-12-month P/S of 0.89x is higher than the industry average of 0.87x.
BBWI’s EPS is expected to decline 4.6% year-over-year to $3.98 in 2023. The stock has lost 61.4% year-to-date to close the last trading session at $26.92.
BBWI has an F grade for Stability and a D grade for Growth, Momentum, and Sentiment. Click here to check additional BBWI ratings (Value and Quality). BBWI is ranked #34 out of 63 stocks in the Home Improvement & Goods industry.
NFLX shares were trading at $175.98 per share on Tuesday morning, down $1.36 (-0.77%). Year-to-date, NFLX has declined -70.79%, versus a -18.46% rise in the benchmark S&P 500 index during the same period.
About the Author: Riddhima Chakraborty
Riddhima is a financial journalist with a passion for analyzing financial instruments. With a master's degree in economics, she helps investors make informed investment decisions through her insightful commentaries.
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