3 Falling Stocks That Aren't Likely to Rebound Anytime Soon

Rising inflation and the Fed’s potential interest rate hikes to control it, combined with other economic uncertainties, have led to massive stock market sell-offs. Consequently, many fundamentally weak stocks have lost significantly. Carnival Corporation (CCL), NIO Inc. (NIO), and Shopify (SHOP), which are down more than 30% year-to-date, may not rebound anytime soon because of their lackluster financials and poor growth attributes. Let’s evaluate these names.

The major stock market indexes made a comeback yesterday. The S&P 500 gained 2.4%, while the Dow Jones and the Nasdaq climbed 2.1% and 2.5%, respectively. Despite yesterday’s relief rally, the lingering issues, such as the multi-decade high inflation and the Federal reserve’s upcoming interest rate hikes, are expected to keep the stock market under tremendous pressure.

The Federal Reserve recently raised its benchmark interest rate by 75 basis points, the largest increase in nearly three decades to fight the soaring inflation, and hinted at more aggressive policy tightening ahead. As a result, the S&P 500 lost 5.8% last week, marking its biggest weekly loss since March 2020.

Goldman Sachs predicts that the odds of the U.S. economy tipping into recession over the next year is 30%, up from 15% earlier.

Amid the current scenario, fundamentally weak stocks Carnival Corporation & plc (CCL), NIO Inc. (NIO), and Shopify Inc. (SHOP) have slumped more than 30% year-to-date and are not likely to rebound anytime soon. Therefore, these stocks are best avoided now.

Carnival Corporation & plc (CCL)

CCL functions as a leisure travel company. Its ships visit approximately 700 ports under the Carnival Cruise Line, Princess Cruises, Holland America Line, P&O Cruises (Australia), Seabourn, Costa Cruises, AIDA Cruises, P&O Cruises (UK), and Cunard brand names.

Last month, CCL closed its private offering of $1.0 billion aggregate principal amount of 10.5% senior unsecured notes due 2030. The Senior Unsecured Notes will pay interest semi-annually on June 1 and December 1 of each year, beginning on December 1, 2022, at a rate of 10.5% per year and are callable beginning June 1, 2025.

The company intends to use the net proceeds of the offering to make scheduled principal payments on debt during fiscal 2023 and for general corporate purposes.

For the first quarter ending February 28, 2022, CCL’s operating loss came in at $1.49 billion. The adjusted net loss amounted to $1.88 billion, while its loss per share stood at $1.66 over the period. The net cash used in operating activities came in at $1.21 billion over the period.

Analysts expect CCL's EPS to remain negative in the second quarter ending May 2022. The company's shares have plunged 52.3% year-to-date and 58.7% over the past nine months.

CCL'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.

CCL is rated an F grade for Quality and Stability and a D for Value. Within the F-rated Travel – Cruises industry, it is ranked #3 of 4 stocks.

To see additional POWR Ratings for Growth, Sentiment, and Momentum for CCL, click here.

NIO Inc. (NIO)

Headquartered in Shanghai, China, NIO designs, develops, manufactures, and sells smart electric vehicles. It offers five, six, and seven-seater electric SUVs and smart electric sedans. The company is also engaged in the provision of energy and service packages to its users; design and technology development activities.

In the first quarter ending March 31, 2022, NIO’s loss from operations increased 639.7% year-over-year to RMB2.19 billion ($327.02 million). Its adjusted net loss grew 269.3% from its year-ago value to RMB1.31 billion ($195.68 million), while its adjusted loss per share rose 243.5% from its prior-year quarter to RMB0.79.

The consensus EPS estimate is expected to remain negative in the second quarter ending June 2022. The stock has declined 55.7% year-to-date and 40.9% over the past nine months.

NIO'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 Growth and Stability and a D for Sentiment. In the F-rated Auto & Vehicle Manufacturers industry, it is ranked #62 of 65 stocks.

In addition to the POWR Ratings grades I have just highlighted, you can see NIO’s Momentum, Value, and Quality ratings here.

Shopify Inc. (SHOP)

Headquartered in Ottawa, Canada, SHOP provides an e-commerce platform and services in Canada, the United States, Europe, the Middle East, Africa, the Asia Pacific, and Latin America. The company's platform permits merchants to display, manage, market, and sell its products through various sales channels.

In the first quarter ending March 31, 2022, SHOP’s loss from operations came in at $97.98 million compared to an income of $118.90 million in the prior quarter. The net loss came in at $1.47 billion compared to a net income of $1.26 billion in the previous period.

The consensus EPS estimate of $0.26 represents a year-over-year decline of 88.3% for the second quarter ending June 2022. The company's shares have plunged 77% year-to-date and 78% over the past nine months.

SHOP'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 Sentiment and a D for Stability and Growth. SHOP is ranked #31 of 31 stocks in the D-rated Internet - Services industry.

Click here to see the additional POWR Ratings for SHOP (Quality, Value, and Momentum).

CCL shares were trading at $9.60 per share on Wednesday morning, up $0.03 (+0.31%). Year-to-date, CCL has declined -52.29%, versus a -20.86% 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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