3 vulnerable stocks to avoid until further notice

Consistent with general expectations, the Fed raised its short-term borrowing rate by 75 basis points at a target range of 3.75% to 4%. The central bank’s persistent hawkish stance lays the groundwork for a interest rate to reach 5% by March next year, triggering a recession.

With rising interest rates set to hurt businesses by weakening demand and making borrowing more expensive, economic recovery and a return to market stability seem unlikely anytime soon. Colin Graham, head of multi-asset strategy at asset manager Robeco, said:Everybody’s gotten so bearish; it’s like everyone is on one side of the ship thinking things will never get better.

Given uncertain economic and market conditions, it might be wise to avoid fundamentally weak and troubled stocks Coinbase Global, Inc. (PIECE OF MONEY), Carnival Corporation & plc (CCA) and SoFi Technologies, Inc. (SOFI) until the end of the current turbulence is in sight.

Coinbase Global, Inc. (PIECE OF MONEY)

COIN is a fintech company that 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 for institutions for crypto transactions, and technology and services for ecosystem partners.

On Nov. 1, it was revealed that COIN had asked federal court for permission to file an amicus brief in the ongoing lawsuit between the U.S. Securities and Exchange Commission (SEC) United and Ripple Labs. The SEC sued Ripple in late 2020 over allegations that it sold XRP as an unregistered security.

COIN argued that the SEC’s inconsistent enforcement approach creates “uncertainty” for companies in the sector.

On October 17, it was revealed that COIN plans to sue 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 instead of $2.90 for about six hours on COIN.

On September 12, information emerged that the brother of a former COIN product manager pleaded guilty to a wire fraud conspiracy charge when prosecutors called the first insider trading case involving cryptocurrency.

The above developments illustrate a long-standing concern of financial regulators about the risks posed to institutions by external partnerships and justify the call for greater regulation that harms the USP of decentralized finance and the businesses built around it. ‘she, like COIN.

During the second quarter of fiscal 2022 ended June 30, total COIN revenue decreased 63.7% year-over-year to $808.33 million. During the same period, the company reported a operating loss of $1.04 billion, compared to revenue of $874.73 for the prior year period.

Additionally, COIN’s net loss attributable to common shareholders was $1.1 billion and $4.98 per share, compared to net income of $1.59 billion and $6.42 per share at quarter of the previous year, respectively.

Analysts expect COIN revenue for the fiscal year ending December 2022 to decline 57.7% year-over-year to $3.32 billion. Additionally, the company’s current-year loss per share is expected to be $6.64, compared to EPS of $17.10 a year earlier.

The stock plunged 75.8% year-to-date to close last trading session at $60.71.

It’s no surprise that COIN has an overall rating of F, which translates to strong selling in our POWR Rankings system. POWR ratings rate stocks on 118 different factors, each with its own weighting.

COIN also has an F rating for Growth, Stability, and Sentiment and a D for Value, Momentum, and Quality.

It is ranked last among 146 stocks in the F-rated Software app industry.

Carnival Corporation & plc (CCA)

CCL is one of the pioneers in global leisure travel. The company operates its ships under different brands, including Carnival Cruise Line, Princess Cruises, Holland America Line, P&O Cruises (Australia), Seabourn, Costa Cruises, P&O Cruises (UK) and Cunard. The company owns and operates hotels, lodges, glass dome cars and coaches.

On October 18, CCL announced an 18-month extension to the maturity of $87 million of convertible bonds at the current rate of 5.75%. This reflects the debts of the company and involves potential interest rate risk amid continued hawkish Fed policy.

During the third quarter of fiscal 2022 ended August 31, CCL recorded an operating loss of $279 million. The company’s adjusted net loss was $688 million over the same period. CCL’s long-term debt also increased slightly to $28.52 billion as of August 31, 2022, from its November 30, 2021 levels.

Analysts expect CCL’s loss per share to be $0.86 for the fourth quarter of fiscal 2022 (ending November 2022). This should put the company at a loss of $4.68 per share for the full year 2022. The company has missed consensus EPS estimates in each of the last four quarters.

The stock is down 59.4% year-to-date to close the last trading session at $8.69.

CCL’s POWR ratings are consistent with this bleak outlook. The stock has an overall rating of D, which translates to a sell in our proprietary rating system. It has an F rating for stability and sentiment and a D for value and quality.

In category F Travel – Cruises industry, CCL is ranked #2 out of 4 stocks.

Click here to see additional POWR ratings for growth and momentum for CCL.

SoFi Technologies, Inc. (SOFI)

SOFI operates as a one-stop-shop for financial services through its platform. The Company operates through three segments: Loans; Technology platform; and Financial Services.

On August 9, SOFI announced the launch of two new ETFs, SoFi Web 3 (TWEB) and SoFi Smart Energy (ENRG). However, with markets under significant pressure from macroeconomic and geopolitical headwinds, it may be some time before these new launches find traction with investors.

In the third quarter of fiscal 2022 ended September 30, SOFI’s net loss increased 146.8% year-over-year to $74.21 million. That translated into a quarterly loss per share of $0.09, up 80% year over year. The company’s total liabilities were $10.33 billion as of September 30, 2022, compared to $4.48 billion as of December 31, 2021.

SOFI’s loss per share for the fourth fiscal quarter (ending December 2022) is expected to be $0.06. Additionally, analysts expect the company to report a net loss of $0.30 per share for the current fiscal year.

The stock has fallen 67.4% year-to-date to close the last trading session at $5.12.

SOFI’s weak fundamentals are reflected in its POWR ratings. The stock has an overall F rating, which equates to a strong sell in our proprietary rating system. It has an F rating for stability and quality and a D for growth, momentum and value.

SOFI is ranked No. 104 among 106 stocks in the F-rated Financial Services (Corporate) industry.

Click here to view additional SOFI reviews.

COIN shares were trading at $56.56 per share on Thursday afternoon, down $4.15 (-6.84%). Year-to-date, COIN is down -77.59%, compared to a -20.58% rise in the benchmark S&P 500 over the same period.

About the Author: Santanu Roy

Fascinated by the traditional and evolving factors that influence investment decisions, Santanu decided to pursue a career as an investment analyst. Prior to moving into investment research, he was a process associate at Cognizant. With a master’s degree in business administration and a fundamental approach to business analysis, he aims to help retail investors identify the best long-term investment opportunities. After…

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