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Don’t Get Stuck Holding Any of These Stocks in Q4

While inflation seemed to cool off in October, it is way above the Fed’s 2% target. As the Fed continues to fight sky-high inflation with aggressive rate hikes, chances of a recession are rising. Hence, fundamentally weak stocks Plug Power (PLUG), Bed Bath & Beyond (BBBY), and Faraday Future Intelligent Electric (FFIE) might be best avoided. Read more...

The consumer price index for October rose 0.4% over the prior month and 7.7% from a year ago. Even with the slowdown in the inflation rate, it remains well above the Fed’s 2% target, and several areas of the report show that the cost of living still remains high.

On the other hand, the Central bank announced its fourth straight interest rate hike of three-quarters of a percentage point last week, continuing its aggressive and unprecedented campaign to get inflation under control.

Moreover, it has become more difficult than expected for the central bank to get a handle on rising prices. Consequently, Federal Reserve Chair Jerome Powell has conceded that the chances of a soft landing for the economy have narrowed. This has fueled fears about a possible recession.

Hence, it could be wise for investors to steer clear of fundamentally weak stocks Plug Power Inc. (PLUG), Bed Bath & Beyond Inc. (BBBY), and Faraday Future Intelligent Electric Inc. (FFIE).

Plug Power Inc. (PLUG)

PLUG is a leading provider of comprehensive hydrogen fuel cell (HFC) turnkey solutions. The company offers end-to-end clean hydrogen and zero-emissions fuel cell solutions for supply chain and logistics applications, on-road electric vehicles, the stationary power market, and more.

On October 19, PLUG and Olin Corporation (OLN) announced the launch of a joint venture to begin the construction of a 15-ton-per-day hydrogen plant in St. Gabriel, Louisiana. However, the gains from the joint venture might not be realized anytime soon.

During the third quarter that ended September 30, 2022, PLUG’s total operating expenses increased 68.2% year-over-year to $113.68 million. The company’s operating loss rose 261.9% from the year-ago value to $159.75 million. Its gross loss increased 48.2% year-over-year to $46.06 million.

Street estimates PLUG’s EPS to decline 25% year-over-year to negative $1.03 for the fiscal year ending December 2022. Moreover, the company has failed to surpass the consensus EPS estimates in each of the trailing four quarters.

Over the past year, PLUG has plunged 57.7% to close the last trading session at $17.01. The stock has declined 39.7% year-to-date.

PLUG’s POWR Ratings are consistent with this bleak outlook. The stock has an overall rating of F, which translates to a Strong Sell in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.

It has an F grade for Stability, Sentiment, and Quality and a D for Growth and Value. It is ranked #88 out of 89 stocks in the Industrial – Equipment industry.

To see PLUG’s POWR Rating for Momentum, click here.

Bed Bath & Beyond Inc. (BBBY)

BBBY operates a chain of retail stores. The company sells a range of domestic merchandise, home furnishings, and other juvenile products. The company owned more than 953 stores as of February 26, 2022, and offers its products through various websites and applications.

On September 15, BBBY reported shutting off more stores, including one in South Sound. The company had already announced in August that it was closing 150 “low performing” locations stores in an effort to improve performance. The closure of stores could lead to lower sales in the short run.

BBBY’s net sales declined 28% year-over-year to $1.43 billion for the second quarter that ended August 27, 2022. Its non-GAAP net loss came in at $256 million, compared to a non-GAAP net income of $4 million in the year-ago period. In addition, its adjusted loss per share came in at $3.22, compared to an adjusted EPS of $0.04.

Analysts expect BBBY’s EPS to decline 695% year-over-year to a negative $8.59 in the current fiscal year ending February 2023, while its revenue is expected to decrease 23.3% year-over-year to $6.03 billion in the current year.

BBBY has declined 82.2% over the past year to close its last trading session at $3.88. The stock has plunged 73.4% year-to-date.

It’s no surprise that BBBY has an overall rating of F, which translates to a Strong Sell in our POWR Ratings system.

It has a grade of F for Stability and Sentiment and a D for Quality and Momentum. The stock is ranked #57 out of the 60 stocks in the Home Improvement & Goods industry.

In addition to the POWR Ratings grades I’ve just highlighted, you can see the BBBY ratings for Value and Growth.

Faraday Future Intelligent Electric Inc. (FFIE)

FFIE engages in the design, development, manufacture, engineering, sale, and distribution of electric vehicles and related products in the United States and internationally. It aims to break the boundaries between the Internet, IT, creative, and auto industries with product and service offerings that integrate new energy, AI, Internet, and sharing models.

On September 22, it was reported that FFIE’s board of directors and its advisors continued to pursue financing alternatives with multiple parties to support the production of its FF 91. However, allegations that certain directors are conspiring to pursue unnecessary bankruptcy for their own personal gain impacted the fundraising.

Back in August, several employees of FFIE called on the board and shareholders of the company to remove Executive Chairperson Susan Swenson. In a letter dated August 23, the employees alleged that Swenson had attempted to push the company into bankruptcy and restructuring. These issues have hampered investors’ confidence.

For the fiscal second quarter ended June 30, 2022, FFIE’s total operating expenses increased 396.5% from the year-ago period to $137.47 million. Its operating loss came in at $137 million, up 389.3% year-over-year. Its net loss came in at $142 million, up 167.9% year-over-year.

FFIE’s EPS is expected to decline 288.9% year-over-year to negative $0.35 in the fiscal fourth quarter ending December 2022.

The stock has fallen 92.7% over the past year to close the last trading session at $0.62.

FFIE’s weak fundamentals are reflected in its POWR Ratings. The company has an overall F rating, equating to a Strong Sell in our proprietary rating system.

It has an F grade for Value, Stability, and Quality and a D for Sentiment. In the D-rated Auto & Vehicle Manufacturers industry, FFIE is ranked #57 out of 63 stocks.

Click here to see the ratings of FFIE for Growth and Momentum.

PLUG shares were trading at $17.64 per share on Friday morning, up $0.63 (+3.70%). Year-to-date, PLUG has declined -37.51%, versus a -15.75% 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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