The 4 Scariest Stocks You Could Own in 2022 Once again, recessionary concerns have been triggered by the jumbo rate hike the Fed dished out this week. Hence, fundamentally weak stocks Snap (SNAP), Coinbase Global (COIN), Peloton Interactive (PTON),...
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Once again, recessionary concerns have been triggered by the jumbo rate hike the Fed dished out this week. Hence, fundamentally weak stocks Snap (SNAP), Coinbase Global (COIN), Peloton Interactive (PTON), and Riot Blockchain (RIOT) might be best avoided this year. Continue reading to find out why….
The central bank announced its fourth straight interest rate hike of three-quarters of a percentage point, continuing its aggressive and unprecedented campaign to get inflation under control.
The Federal Reserve Chair Jerome Powell has conceded that the chances of a soft landing for the economy are lower now, as it has become more difficult than expected for the central bank to handle rising prices. This has raised fears about a possible recession next year.
According to a Bloomberg Economics forecast model, as the U.S. economy contends with decades-high inflation, interest rate hikes, and mounting geopolitical tension, recession within the next 12 months is a virtual certainty.
Given this backdrop, fundamentally weak Snap Inc. (SNAP), Coinbase Global, Inc. (COIN), Peloton Interactive, Inc. (PTON), and Riot Blockchain, Inc. (RIOT) might be the scariest stocks you could own in 2022.
Snap Inc. (SNAP)
SNAP operates as a camera company internationally. The company offers Snapchat, a camera application with various functionalities that enable people to communicate visually through short videos and images.
In August, it was reported that SNAP reached a $35 million settlement with the state of Illinois in a class-action lawsuit to pay Illinois residents who used the app's "lenses" or "filters" features between a specific time. The lawsuit alleged that SNAP's filters and lenses violated the state's Biometric Information Privacy Act (BIPA).
SNAP's operating loss rose 140.7% year-over-year to $435.24 million for the third quarter ended September 30, 2022. The company's adjusted EBITDA declined 58.3% year-over-year to $72.64 million. Its non-GAAP net income decreased 50.8% year-over-year to $132.06 million, while its non-GAAP EPS declined 52.9% year-over-year to $0.08.
Analysts expect SNAP's EPS to decline 72.1% year-over-year to $0.14 for the current fiscal year ending December 2022. Its revenue is expected to be $4.61 billion for the same year.
The stock has declined 82.7% over the past year to close its last trading session at $9.16. SNAP has declined 80.5% year-to-date.
SNAP's POWR Ratings reflect this bleak outlook. The stock has an overall D rating, equating to a Sell in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
SNAP is graded an F in Growth and a D in Momentum, Stability, Sentiment, and Quality. It is ranked #54 out of 61 stocks in the F-rated Internet industry.
Beyond the POWR Rating grades stated above, SNAP's rating for Value can be seen here.
Coinbase Global, Inc. (COIN)
COIN provides end-to-end financial infrastructure and technology for the global crypto economy. The company offers financial accounts for retail crypto users, a liquid marketplace to institutions for crypto transactions, and technology and services for ecosystem partners.
On October 17, COIN hinted about suing about 1,000 users in the republic of Georgia for taking advantage of a pricing glitch when the Lari, the local currency, was priced at $290 rather than $2.90 for about six hours on Coinbase.
In the fiscal third quarter ended September 30, COIN's total revenue decreased 55% year-over-year to $590.34 million. Its operating income declined 290.7% to $556.48 million. The company reported a net income of negative $544.64 million, down 234.1% from its prior-year quarter, while its net income per share fell 250% year-over-year to negative $2.43.
The consensus EPS estimate of a negative $0.79 for the fiscal first quarter ending March 2023 represents a 586% year-over-year decline. The consensus revenue estimate of $851.11 million for the same quarter represents a fall of 27% from the same quarter last year.
The stock has plunged 83.8% over the past year to close the last trading session at $55.80. It has declined 76.3% year-to-date.
It's no surprise that COIN has an overall rating of F, which translates to a Strong Sell in our POWR Ratings system.
COIN also has an F grade for Growth, Stability, and Sentiment and a D for Value, Momentum, and Quality. It is ranked last among 145 stocks in the F-rated Software – Application industry.
Click here to see more of COIN's component grades.
Peloton Interactive, Inc. (PTON)
PTON operates an interactive fitness platform internationally. The company offers connected fitness products with a touchscreen that streams live and on-demand classes, connected fitness subscriptions for various household users, and access to various live and on-demand classes.
On November 2, it was reported that National investment fraud lawyers KlaymanToskes were investigating full-service brokerage firms on behalf of current and former PTON employees and investors who sustained losses from holding concentrated or margined positions, as shares fell 95% from an all-time high of $162.72 on December 24, 2020.
PTON's total revenue declined 23.4% year over year to $616.50 million for the fiscal first quarter ended September 30. Its gross profit came in at $217.20 million, down 17.4% year-over-year. Its net loss rose 208.6% year-over-year to $408.50 million. The company's net loss per share attributable to common stockholders amounted to $1.20.
PTON's revenue is expected to decrease 37.1% year-over-year to $712.86 million in the second fiscal quarter ending December 2022. Its EPS is expected to be negative $0.67 for the same quarter.
The stock has lost 89.6% over the past year to close the last trading session at $9.34. It has declined 73.9% year-to-date.
As expected from its poor fundamentals, PTON has an overall F rating, which equates to a Strong Sell in our proprietary rating system.
It also has an F grade for Sentiment and a D for Value, Stability, and Quality. PTON is ranked #57 out of 59 stocks in the Consumer Goods industry.
Click here to access the additional ratings for PTON (Growth and Momentum).
Riot Blockchain, Inc. (RIOT)
RIOT engages in Bitcoin (BTC) mining operations in North America. It operates through Bitcoin Mining; Data Center Hosting; and Electrical Products and Engineering segments.
On October 19, RIOT announced that it had broken ground at its 1-gigawatt expansion project in Corsicana, Navarro County, Texas. The first phase of the Corsicana Facility, anticipated to consist of 400 megawatts with self-mining and data center hosting operations, is expected to commence by the fourth quarter of 2023, which is still quite far away.
RIOT's operating loss for the fiscal second quarter ended June 30 increased significantly from the year-ago value to $366.01 million. Net income and net income per share declined significantly year-over-year to a negative $366.33 million and a negative $2.81.
Street's EPS estimate for the current fiscal year (ending December 2022) of negative $2.52 indicates a considerable year-over-year decline.
Over the past year, the stock has declined by 83.2% to close its last trading session at $5.51. It has declined 75.3% year-to-date.
RIOT's poor prospects are reflected in its POWR Ratings. The stock has an overall F rating, equating to a Strong Sell in our proprietary rating system.
RIOT has an F grade for Stability and Quality and a D for Value, Momentum, and Sentiment. In the D- rated Technology – Services industry, it is ranked #76 out of 77 stocks.
To see the additional POWR Rating for Growth for RIOT, click here.
SNAP shares were trading at $9.12 per share on Friday morning, down $0.04 (-0.44%). Year-to-date, SNAP has declined -80.61%, versus a -20.42% rise in the benchmark S&P 500 index during the same period.
About the Author: Kritika Sarmah
Her interest in risky instruments and passion for writing made Kritika an analyst and financial journalist. She earned her bachelor's degree in commerce and is currently pursuing the CFA program. With her fundamental approach, she aims to help investors identify untapped investment opportunities.
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