The tech sector has witnessed solid growth over the past years. However, the Fed’s rate hikes to curb inflation are constraining tech firms of all sizes. Also, with slowing demand and increased competition, some tech stocks may be headed for a pullback.
Therefore, we think Aurora Innovation, Inc. (AUR), DMG Blockchain Solutions Inc. (DMGGF), and MMTec, Inc. (MTC) might be best avoided now, considering their bleak fundamentals.
The recent failure or the Silicon Valley Bank, which has long been considered the lifeblood for tech startups, has compelled companies to scramble to determine their financial exposure and the impact on their ability to operate at a time when many businesses are already on edge due to widespread layoffs and limited access to capital in an uncertain economy.
Furthermore, companies with products and components that rely on global supply chains are experiencing disruptions as a result of variables such as trade disputes and shipping delays.
Global growth slowed last year to 3.2%, more than one percentage point weaker than expected at the end of 2021, primarily due to Russia-Ukraine war and the associated cost-of-living crisis in many countries. Global growth is projected to be 2.6% in 2023. Softening consumer spending and lower product demand could be a significant headwind for the industry.
Let’s discuss the stocks mentioned above.
Aurora Innovation, Inc. (AUR)
AUR operates as a self-driving technology company in the United States. It focuses on developing Aurora Driver, a platform that brings a suite of self-driving hardware, software, and data services together to adapt and interoperate passenger vehicles, light commercial vehicles, and trucks.
AUR’s ROTA of negative 86.11% is lower than the industry average of 5.18%. Also, its ROCE of negative 67.23% is lower than the industry average of 13.83%.
Its forward Price/Sales of 240.35x is significantly higher than the industry average of 1.23x, while its forward EV/Sales multiple of 79.52 is significantly higher than the industry average of 1.56.
AUR’s collaboration revenue decreased 17.1% year-over-year to $68 million for the full year that ended December 31, 2022. The company’s net loss increased 128.2% year-over-year to $1.72 million. Additionally, its net loss per share came in at $1.51, representing a 23.8% increase from the year-ago period.
AUR’s revenue is expected to decline 98.5% to $1 million in 2023. Its EPS is expected to decrease 28.3% to a negative $0.68 in 2023. It has lost 81% over the past year to close the last trading session at $1.23.
AUR’s bleak outlook is reflected in its POWR Ratings. The stock has an overall rating of F, equating to a Strong Sell in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
It is also rated an F grade for Growth and Value and a D for Stability and Quality. In the Technology – Services industry, it is ranked #77 out of 80 stocks. Click here to see AUR’s rating for Sentiment and Momentum.
DMG Blockchain Solutions Inc. (DMGGF)
Headquartered in Delta, Canada, DMGGF operates as a blockchain and cryptocurrency company in Canada. The company manages, operates, and develops digital solutions to monetize the blockchain ecosystem.
DMGGF’s ROTA of negative 31.51% is lower than the industry average of 0.70%. Also, its ROCE of negative 29.36% is lower than the industry average of 2.69%.
DMGGF’s revenue decreased 49.8% year-over-year to C$7.17 million ($5.32 million) for the first quarter ended December 31, 2022. However, its net loss came in at C$7 million ($5.19 million), compared to a net income of C$5.04 million ($3.74 million) in the year-ago period. Its loss per share came in at C$0.04, compared to EPS of C$0.03 for the same period the prior year.
Street expects DMGGF’s revenue is expected to fall 26.9% year-over-year to $5.88 million for the quarter ending June 2023. The stock has lost 58% over the past year to close the last trading session at $0.22.
DMGGF has an overall F rating, equating to a Strong Sell in our POWR Ratings system.
It has an F grade for Quality and a D for Growth, Value and Stability. It is ranked #73 in the same industry. We have also rated DMGGF for Sentiment and Momentum. Get all the DMGGF ratings here.
MMTec, Inc. (MTC)
Headquartered in Beijing, the People’s Republic of China, MTC together with its subsidiaries, develops and deploys platforms that enable financial institutions to engage in securities market transactions and settlements worldwide. The company operates in two segments: Gujia, MM Future, MMBD Advisory and HC Securities; and MM Global.
MTC’s ROTA of negative 60.89% is lower than the industry average of 0.70%. Also, its ROCE of negative 59.61% is lower than the industry average of 2.69%.
Its trailing-12-months Price/Sales of 3.50x is 27.4% higher than the industry average of 2.75x.
For the first half that ended December 31, 2022, MTC’s loss from operations increased 59.5% year-over-year to $2.93 million. The company’s current assets came in at $10.95 million for the period that ended June 30, 2022, compared to $13.85 million for the period that ended December 31, 2021.
Also, its current liabilities came in at $1.24 million, compared to $1.13 million for the same period the prior year.
The stock has lost 82.6% over the past year to close the last trading session at $1.09.
MTC’s POWR Ratings are consistent with its weak fundamentals. The stock has an overall F rating, which equates to Strong Sell in our proprietary rating system. It also has an F grade for Quality and a D for Growth and Sentiment. Within the same industry, it is ranked #76.
In addition to the POWR Rating grades we have stated above, you can see MTC’s Value and Momentum ratings here.
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AUR shares were trading at $1.29 per share on Thursday afternoon, up $0.06 (+4.88%). Year-to-date, AUR has gained 6.61%, versus a 7.42% rise in the benchmark S&P 500 index during the same period.
About the Author: Rashmi Kumari
Rashmi is passionate about capital markets, wealth management, and financial regulatory issues, which led her to pursue a career as an investment analyst. With a master's degree in commerce, she aspires to make complex financial matters understandable for individual investors and help them make appropriate investment decisions.
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