Is Now the Time to Buy These Poor-Performing Stocks?
The stock market sell-offs triggered by macroeconomic and geopolitical issues since the beginning of the year have led to many stocks delivering poor performance. Although the correction was broad-based, Etsy...
The stock market sell-offs triggered by macroeconomic and geopolitical issues since the beginning of the year have led to many stocks delivering poor performance. Although the correction was broad-based, Etsy (ETSY) and Snap (SNAP) have performed worse than their industry. However, is it wise to scoop up these stocks at their current price levels? Let's discuss….
The stock market has experienced a turbulent year so far due to various macroeconomic headwinds and persistent geopolitical issues. The Dow Jones Industrial Average (DJIA) has declined 14.5% year-to-date to close the last trading session at 31,072.61, while the Nasdaq Composite and the S&P 500 have lost 27.4% and 19.6% to close the last trading session at 11,360.05 and 3,830.85, respectively.
The economy has been facing its worst inflation in 41 years, with the June consumer price index rising 9.1% from the year-ago period. Since the Federal Reserve has been actively trying to control the surging inflation by hiking the benchmark interest rates, investors are concerned about the economy tipping into a recession.
Technology has been the hardest hit sector so far. And fundamentally weak tech stocks Etsy, Inc. (ETSY) and Snap Inc. (SNAP) have performed worse than their industry and the broader sector. With the increasing odds of a recession, these stocks are expected to slide further due to their weak growth prospects. Thus, these stocks are best avoided now.
Etsy, Inc. (ETSY)
ETSY operates two-sided online marketplaces connecting people, buyers, and sellers worldwide. The company operates through four segments: Etsy, Reverb, Depop, and Elo7.
ETSY's gross profit declined 0.4% year-over-year to $406.27 million for the first quarter ended March 31, 2022. The company's net income fell 40.1% year-over-year to $86.10 million. In addition, adjusted EBITDA declined 13.5% year-over-year to $159.19 million.
Analysts expect ETSY's EPS for the quarter ended June 30, 2022, to decline 50% year-over-year to $0.34. Over the past nine months, the stock has lost 62.8% to close the last trading session at $84.72.
ETSY's weak fundamentals are reflected in its POWR Ratings. It has an overall rating of D, equating to a Sell in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
It has an F grade for Sentiment and a D for Growth, Value, and Stability. It is ranked #50 out of 65 stocks in the F-rated Internet industry. Click here to see the other ratings of ETSY for Momentum and Quality.
Snap Inc. (SNAP)
SNAP is a camera company. The company's flagship product, Snapchat, is a camera application that helps people communicate visually with friends and family through short videos and images called Snaps. The company has approximately 319 million daily active users.
SNAP's free cash flow declined 16% year-over-year to $106.28 million. In addition, its adjusted loss per share came in at $0.02. Also, its non-GAAP net loss came in at $39.28 million, compared to its non-GAAP net income of $2.55 million.
For the fiscal year ended December 31, 2022, SNAP's EPS is expected to decline 59.4% year-over-year to $0.20. Over the past nine months, the stock has lost 81.6% to close the last trading session at $13.92.
SNAP's POWR Ratings are consistent with this bleak outlook. It has an overall rating of D, equating to a Sell in our proprietary rating system.
It has an F rating for Stability and a D rating for Momentum, Sentiment, and Quality. Within the same industry, it is ranked #59. To see the other ratings of SNAP for Growth and Value, click here.
ETSY shares rose $1.28 (+1.51%) in premarket trading Tuesday. Year-to-date, ETSY has declined -60.72%, versus a -18.41% 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.
The post Is Now the Time to Buy These Poor-Performing Stocks? appeared first on StockNews.com
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