The Federal Reserve has raised its benchmark interest rates by another 75 basis points today for the second straight month to battle high inflation. Since the consistent rate hikes could push the economy into a recession, the market is expected to remain under pressure.
Moreover, the International Monetary Fund cut its global growth projections for 2022 and 2023, stating that the world’s economic outlook is “gloomy and more uncertain.” The CBOE Volatility Index has gained 39.1% year-to-date.
Given the current uncertain market conditions, we believe fundamentally-weak stocks Carvana Co. (CVNA), Wayfair Inc. (W), and Nextdoor Holdings, Inc. (KIND) are best avoided now.
Carvana Co. (CVNA)
CVNA and its subsidiaries function as an e-commerce platform for buying and selling used cars in the United States. The company's platform permits customers to research and identify a vehicle, inspect it using its 360-degree vehicle imaging technology, obtain financing and warranty coverage, purchase the vehicle, and schedule delivery or pick-up from their desktop or mobile devices.
For the first quarter ending March 31, 2022, CVNA's gross profit decreased 11.8% year-over-year to $298 million. The net loss increased 622.2% from its year-ago value to $260 million, while its loss per share increased 528.3% from its prior-year quarter to $2.89.
Analysts expect CVNA's EPS to remain negative in the third quarter ending September 2022. The company's shares have plunged 92.8% year-to-date and 91.7% over the past nine months.
CVNA's POWR Ratings are consistent with this bleak outlook. The stock has an overall rating of F, which translates to Strong Sell in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
CVNA is rated an F grade for Quality, Growth, and Stability. Within the F-rated Internet industry, it is ranked #63 of 64 stocks. Click here to see additional POWR Ratings for Value, Sentiment, and Momentum for CVNA.
Wayfair Inc. (W)
W is engaged in the e-commerce business in the United States and internationally. The company provides approximately thirty-three million products for the home sector under various brands. It offers online selections of furniture, décor, housewares, and home improvement products through its sites, including Wayfair, Joss & Main, AllModern, Birch Lane, and Perigold brands.
W’s revenue decreased 13.9% year-over-year to $2.99 billion for the first quarter ended March 31, 2022. Its loss from operations came in at $310 million, compared to an income from operations of $26 million from the prior-year quarter. Its net loss stood at $319 million compared to a net income of $18 million. Its loss per share amounted to $3.04.
The consensus EPS estimate is expected to remain negative in the fourth quarter ending December 2022. Analysts expect W's revenue to decline 16.4% year-over-year to $3.23 billion in the second quarter ending June 2022. The stock has declined 84.1% year-to-date and 80.9% over the past nine months.
W’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 Ratings system. The stock also has an F grade for Sentiment and a D for Growth and Stability. In the C-rated Specialty Retailers industry, it is ranked 42 of 46 stocks.
In addition to the POWR Ratings grades I have just highlighted, you can see the W ratings for Momentum, Value, and Quality here.
Nextdoor Holdings, Inc. (KIND)
KIND functions as the neighborhood network that connects neighbors, businesses, and public services in the United States and internationally. It enables small and mid-sized businesses, large brands, public agencies, and nonprofits to receive information, give and get help, and build connections.
In the first quarter ending March 31, 2022, KIND’s loss from operations increased 32.9% year-over-year to $33.23 million. Its net loss grew 31.1% from its year-ago value to $32.95 million, while its loss per share stood at $0.09. The net cash used in operating activities amounted to $5.51 million for the quarter ending March 31, 2022.
Analysts expect KIND's EPS to remain negative in the fourth quarter ending December 2022. The company's shares have plunged 71% year-to-date and 69.8% over the past nine months.
KIND’s poor prospects are also apparent in its POWR Ratings. The stock has an overall F rating, which equates to a Strong Sell in our POWR Ratings system. It has an F grade for Stability and a D for Sentiment and Value. KIND is ranked #59 of 64 stocks in the F-rated Internet industry.
Click here to see the additional POWR Ratings for KIND (Quality, Growth, and Momentum).
CVNA shares were trading at $26.42 per share on Wednesday afternoon, up $2.24 (+9.26%). Year-to-date, CVNA has declined -88.60%, versus a -14.64% rise in the benchmark S&P 500 index during the same period.
About the Author: Spandan Khandelwal
Spandan's is a financial journalist and investment analyst focused on the stock market. With her ability to interpret financial data, she aims to help investors evaluate the fundamentals of a company before investing.
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