The Fed’s incessant rate hikes, the banking sector turmoil, and the debt default crisis have triggered fears of a recession. The tech industry, which was already under immense pressure last year, is feared to remain in a vulnerable zone for a while owing to the aforementioned economic headwinds.
Therefore, tech stocks Affirm Holdings, Inc. (AFRM), Riot Platforms, Inc. (RIOT), HIVE Blockchain Technologies Ltd. (HIVE), and Bakkt Holdings, Inc. (BKKT), with a bleak outlook, could be best avoided now.
The tech industry grappled with various headwinds, such as the Fed’s aggressive stance to curb the sticky inflation, geopolitical turmoil-induced supply chain constraints, and massive layoffs.
In addition, banking sector jitters have triggered increased regulatory scrutiny, resulting in a crunched flow of credit into the economy, ultimately making it challenging for tech companies to raise more funds. With this, tech industries could also be vulnerable to the explosive impact of the U.S. debt default crisis if it occurs.
Moreover, governments and enterprises are dealing with macroeconomic and geopolitical challenges, curbing their spending on innovation. Consequently, IT spending is forecasted to slow down in 2023. According to a report by International Data Corporation, overall growth in 2023 will slow to 4.4%, down from the 6% predicted in October.
Furthermore, the wave of layoffs in tech companies could have a net negative drag on the financial performance of the companies over time.
Given this backdrop, fundamentally weak stocks AFRM, RIOT, HIVE, and BKKT might be best avoided this week.
Affirm Holdings, Inc. (AFRM)
AFRM operates a platform for digital and mobile-first commerce in the United States, Canada, and internationally. The company's platform includes a point-of-sale payment solution and a consumer-focused app.
The stock’s trailing-12-month gross profit margin of 45% is 23.6% lower than the industry average of 58.91%. Its trailing-12-month EBITDA and net income margins of negative 66.41% and 64.12% compare with the industry averages of 20.40% and 25.75%, respectively.
AFRM’s operating expenses for the fiscal third quarter that ended March 31, 2023, stood at $691.01 million, up 18.9% year-over-year, while its operating loss came in at $310.04 million, up 36.8% year-over-year.
Its comprehensive loss and net loss per share attributable to common stockholders for Class A and Class B increased 292% and 263.2% year-over-year to $201.38 million and $0.69, respectively.
Analysts expect AFRM’s EPS to decline 27.5% year-over-year to negative $3.20 for the fiscal year ending June 2023. Its revenue is expected to come in at $1.55 billion for the same year.
Over the past year, the stock has plummeted 40.4% to close the last trading session at $13.71. It lost 4.1% intraday.
AFRM’s POWR Ratings reflect this bleak outlook. The stock has an overall F rating, equating to a Strong Sell in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
Also, the stock has a D grade for Growth, Stability, Sentiment, and Quality. It is ranked #80 within the 82-stock Technology - Services industry.
Beyond what we have mentioned above, one can get the additional POWR Ratings for AFRM (Value and Momentum) here.
Riot Platforms, Inc. (RIOT)
RIOT operates as a Bitcoin mining company. It operates through Bitcoin Mining; Data Center Hosting; and Engineering segments. The company also provides co-location services for institutional-scale bitcoin mining companies and critical infrastructure workforce for institutional-scale miners to deploy and operate their miners.
RIOT’s trailing-12-month gross profit margin of 16.40% is 66.7% lower than the industry average of 49.24%. Likewise, its trailing-12-month EBITDA margin and net income margin of negative 60.86% and 238.23% compare to the industry averages of 8.92% and 2.39%, respectively.
For the fiscal first quarter that ended March 31, 2023, RIOT’s operating loss stood at $56.83 million, compared to operating income of $38.86 million for the prior-year quarter. Its adjusted EBITDA came in at $7.50 million, down 40.9% year-over-year.
Its net loss and net loss per share stood at $55.69 million and $0.33 for the same quarter, compared to the net income and net income per share of $36.58 million and $0.31, respectively.
For the fiscal second quarter ending June 2023, RIOT’s EPS is expected to be negative $0.19. Its revenue for the same quarter is expected to come in at $88.44 million. It failed to surpass the consensus EPS estimate in each of the trailing four quarters.
The stock has lost marginally over the past five days and 1.8% intraday to close the last trading session at $11.07.
RIOT’s weak fundamentals are reflected in its POWR Ratings. It has an overall rating of F, which translates to a Strong Sell in our proprietary rating system.
It has an F grade for Value, Stability, and Quality and a D for Sentiment. Within the same industry, it is ranked #81.
One can see RIOT’s ratings for Growth and Momentum here.
HIVE Blockchain Technologies Ltd. (HIVE)
Headquartered in Vancouver, Canada, HIVE operates as a cryptocurrency mining company in Canada, Sweden, and Iceland. It engages in the mining and sale of digital currencies, including Ethereum, Ethereum Classic, and Bitcoin.
HIVE’s trailing-12-month asset turnover ratio of 0.41x is 33.4% lower than the 0.61x industry average. Likewise, the stock’s trailing-12-month EBITDA and EBIT margin is negative 25.54% and 99.29% compare to the industry averages of 8.92% and 4.69%, respectively.
For the fiscal third quarter that ended December 31, 2022, HIVE’s revenue from digital currency mining declined 79.2% year-over-year to $14.32 million. The company’s net loss came in at $90.01 million, compared to a net income of $51.19 million a year ago, while its loss per share came in at $1.09, compared to an EPS of $0.62 in the prior-year quarter.
Analysts expect HIVE’s EPS for the first quarter ending June 2023 to come in at negative $0.29. Its revenue for the same quarter is expected to decline 50.8% year-over-year to $21.75 million. It failed to surpass Street EPS estimates in each of the trailing four quarters.
Over the past year, the stock has declined 19.2% to close the last trading session at $2.98. It has plunged 5.1% over the past month.
HIVE’s POWR Ratings reflect this weak prospect. It has an overall rating of F, which translates to a Strong Sell in our proprietary rating system.
It has a D grade for Value, Stability, and Quality. It is ranked #79 in the same industry.
Click here to see the other ratings of HIVE for Growth, Momentum, and Sentiment.
Bakkt Holdings, Inc. (BKKT)
BKKT provides a platform for crypto and redeeming loyalty points. The company's institutional-grade technology platform offers various solutions, such as Custody, Crypto Connect, Crypto Rewards, and Crypto Payouts. Its platform also offers a range of loyalty solutions, travel solutions, and unified shopping experiences.
BKKT’s trailing-12-month asset turnover ratio of 0.04x is 80.1% lower than the 0.20x industry average. Likewise, its trailing-12-month EBITDA margin and gross profit margin of negative 271% and 201.21% compare to the industry average of 20.40% and 58.91%, respectively.
For the fiscal first quarter that ended March 31, 2023, BKKT’s operating loss stood at $45.40 million. Its adjusted EBITDA loss for the quarter stood at $28.90 million, while its free cash flow came in at negative $52.50 million, compared to negative $36.40 million in the prior-year quarter.
Moreover, the net loss attributable to BKKT and net loss per share attributable to class A common stockholders for the same quarter stood at $14 million and $0.17, up 97.2% and 21.4% year-over-year, respectively. Its total current assets came in at $282.30 million as of March 31, 2023, compared to $326.50 million as of December 31, 2022.
Analysts expect BKKT’s revenue and EPS to come in at $69.10 million and negative $0.53 for the fiscal year ending December 2023. Also, the company failed to surpass the consensus revenue estimates in all four trailing quarters, which is disappointing.
Over the past year, the stock has lost 40.1% to close the last trading session at $1.42. The stock has plummeted 16.7% over the past six months.
It’s no surprise that BKKT has an overall rating of F, which translates to a Strong Sell in our POWR Ratings system.
BKKT has an F grade for Stability and Sentiment and a D for Growth, Value, and Quality. It is ranked last within the same industry.
To see BKKT’s additional ratings (Momentum), click here.
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AFRM shares were trading at $14.00 per share on Friday morning, up $0.29 (+2.12%). Year-to-date, AFRM has gained 44.78%, versus a 10.05% rise in the benchmark S&P 500 index during the same period.
About the Author: Sristi Suman Jayaswal
The stock market dynamics sparked Sristi's interest during her school days, which led her to become a financial journalist. Investing in undervalued stocks with solid long-term growth prospects is her preferred strategy. Having earned a master's degree in Accounting and Finance, Sristi hopes to deepen her investment research experience and better guide investors.
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