As the market braces up for the final week of a volatile September, major stock indices remain upbeat, recovering from the sell-off witnessed earlier this month. According to data compiled by John Hopkins University, U.S. COVID-19 cases averaged about 120,000 per day over the last week, down from a seven-day average of more than 166,000 cases in early September. This, along with Pfizer CEO Albert Bourla’s statement that the United States could return to normalcy within a year, has induced optimism among investors concerning the economic recovery.
Since investors remain upbeat as the Fed decided to keep supporting the economy for now, and COVID-19 cases are declining, the stock market is expected to continue its bull run. However, not all stocks are good bets right now. Several ultra-popular stocks have rallied significantly over the past couple of months without possessing fundamental strength. Their weak financial health could trigger a sharp decline in their share prices in the near term.
SoFi Technologies (SOFI), Camber Energy Inc. (CEI), Northern Dynasty Minerals Ltd (NAK), and ReWalk Robotics Ltd. (RWLK) are three such stocks that have gained momentum because of their popularity among retail traders. However, given their bleak growth potential and poor fundamentals, these stocks are best avoided now.
SoFi Technologies (SOFI)
SOFI, a finance company, operates an online platform that provides financial services. Lending; Financial Services; and Technology platforms are the three operational segments of the company. The company offers a wide range of services, including student loan refinancing, personal loans, auto loan refinance, home loans, mortgage loans, and insurance products for renters, homeowners, automobiles, etc.
For the second quarter that ended June 30, 2021, SOFI reported a net loss of $165.31 million, compared to a net profit of $7.81 million in the prior-year quarter. Its loss per share increased significantly from year-ago value to $0.48, while its cash and cash equivalents declined 47.1% year-over-year to $461.92 million. In addition, the company’s net cash from operating activities declined 79.1% from the year-ago value to $82.61 million.
Analysts expect its EPS to remain negative in fiscal 2021. While the stock has gained 26.1% over the past month, it has declined 15.5% over the past three months.
SOFI’s POWR Ratings are consistent with this bleak outlook. The stock has an overall grade of F, which translates into a Strong Sell rating in our proprietary ratings system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
SOFI has an F grade for Value and Sentiment, and a D for Growth and Stability. Within the D-rated Financial Services (Enterprise) industry, it is ranked #101 out of 103 stocks. To see additional grades for Quality and Momentum, click here.
Camber Energy Inc. (CEI)
CEI is an independent oil and gas company that acquires, develops, and sells crude oil, natural gas, and natural gas liquids (NGL) in Texas. As of March 31, 2020, its total estimated proven reserves were 133,442 million barrels of oil equivalent, consisting of 54,850 barrels of crude oil reserves, 43,955 barrels of NGL reserves, and 207,823 million cubic feet of natural gas reserves.
In May, NYSE American notified CEI that it did not comply with the exchange's continued listing standards as outlined in Section 1007 of the NYSE American Company Guide due to its failure to timely file its Form 10-K for the nine months that ended December 31, 2020.
CEI’s revenue declined 38.1% year-over-year to $57.46 million in the second quarter that ended September 30, 2020. Its operating loss came in at $827.64 million over this period. The company’s net loss surged 642.5% from the year-ago value to $2.06 billion, while its loss per share amounted to $0.19 over this period.
CEI’s poor prospects are also apparent in its POWR Ratings. The stock has an overall grade of F, which equates to a Strong Sell rating in our proprietary ratings system. CEI also has an F grade for Value, Quality, and Stability. Of the 91 stocks in the C-rated Energy – Oil & Gas industry, CEI is ranked last.
Click here to see the additional grades for CEI (Growth, Momentum, and Sentiment).
Northern Dynasty Minerals Ltd (NAK)
NAK is a mineral exploration company. Its principal mining property is the Pebble copper-gold-molybdenum project in southwest Alaska, consisting of 2,402 mineral claims covering about 417 square miles.
During the second quarter that ended June 30, 2021, NAK’s operating loss came in at $9.03 million. The company reported a net loss of $9.22 million, while its loss per share amounted to $0.02 over this period. Moreover, the company’s net cash used in operating activities came in at $16.03 million.
The company’s EPS is expected to remain negative in the current year. Although NAK has gained 59.7% year-to-date, it has declined 47.6% over the past year. Also, the stock price dropped 15.1% over the past six months.
NAK’s weak fundamentals are reflected in its POWR Ratings. The stock has an overall grade of F, which equates to a Strong Sell rating in our POWR Ratings system. The stock also has an F grade for Value, Momentum, and Quality. In the D-rated Industrial – Metals industry, it is ranked #36 out of 37 stocks.
In addition to the POWR Ratings grades I have just highlighted, you can see NAK’s grades for Growth, Stability, and Sentiment here.
ReWalk Robotics Ltd. (RWLK)
RWLK is a medical device company engaged in designing, developing, and commercializing wearable robotic exoskeletons for people with mobility issues or other medical problems in Israel, the United States, Europe, Asia-Pacific, Latin America, and Africa. It advertises and sells its products to third-party payers, institutions, and individuals directly and through distributors.
RWLK’s revenue declined 139% year-over-year to $1.44 million in the second quarter that ended June 30, 2021. Its operating loss increased 23% from the year-ago value to $3.14 million. The company’s net loss grew 10% from the prior-year quarter to $3.14 million, while its loss per share surged 68.2% year-over-year to $0.07.
TTCF’s EPS is expected to remain negative in fiscal 2021. While the stock has returned 64% over the past year, it has fallen 12.6% over the past six months.
RWLK’s POWR Ratings are consistent with this bleak outlook. The stock has an overall grade of D, which equates to a Sell rating in our proprietary ratings system. The stock also has a D grade for Stability, Quality, and Value. RWLK is ranked #149 out of 180 stocks in the C-rated Medical – Devices & Equipment industry.
Beyond the POWR Ratings grades I have just highlighted, you can see RWLK’s grades for Value, Momentum, and Growth here.
Click here to checkout our Healthcare Sector Report for 2021
SOFI shares were trading at $17.15 per share on Tuesday afternoon, down $0.55 (-3.11%). Year-to-date, SOFI has gained 37.86%, versus a 17.31% rise in the benchmark S&P 500 index during the same period.
About the Author: Pragya Pandey
Pragya is an equity research analyst and financial journalist with a passion for investing. In college she majored in finance and is currently pursuing the CFA program and is a Level II candidate.
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