While the new year generally brings out a joyous mood, the waning days of 2022 have instead brought much angst. Although down from its highest levels seen in decades, inflation remains painfully high and is crimping consumer spending.
A Wall Street Journal report suggested that more than two-thirds of economists at top financial institutions expect that the United States will steer into a recession in 2023. These market pundits blame the Fed’s aggressive stance toward controlling inflation through rate hikes for their bleak outlook.
The Fed Reserve raised rates seven times in 2022, pushing the benchmark from a range of 0% to 0.25% to the current 4.25% to 4.50%, a 15-year high. Investors’ hopes for interest rate cuts this year were dashed, with the Fed officials signaling to keep raising rates to between 5%-5.5% in 2023. This could send an already sluggish economy into recession.
Amid this backdrop, it might be best to avoid fundamentally weak DraftKings Inc. (DKNG) and Beyond Meat, Inc. (BYND). These stocks don’t seem to mix well with a potential recession.
DraftKings Inc. (DKNG)
DKNG is a digital sports entertainment and gaming company that offers multi-channel sports betting and gaming technologies. The company operates through two segments: Business-to-Consumer and Business-to-Business.
DKNG’s loss from operations for the fiscal third quarter ended September 30, 2022, narrowed 16.7% year-over-year to $455.03 million. The company’s net loss and adjusted EBITDA loss came in at $450.49 million and $264.21 million, narrowing 17.3% and 15.7% year-over-year, respectively. Also, its loss per share came in at $1, down 25.9% from the year-ago value.
In addition, its total liabilities came in at $2.76 billion for the quarter ended September 30, 2022, compared to $2.39 billion for the fiscal year ended December 31, 2021.
Analysts expect DKNG’s EPS to remain negative for fiscal 2023. Its EPS is expected to decrease by 6.8% per annum over the next five years. Over the past year, the stock has lost 60% to close the last trading session at $11.39.
DKNG’s weak fundamentals are reflected in its POWR Ratings. It has an overall F rating, equating to a 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.
The stock also has an F grade for Stability and Sentiment and a D for Value and Quality. It is ranked last out of 28 stocks in the D-rated Entertainment - Casinos/Gambling industry. Click here to see the other ratings of DKNG for Growth and Momentum.
Beyond Meat, Inc. (BYND)
BYND is a food company that offers plant-based meats. The company’s product offerings include Beyond Burger, Beyond Sausage, Beyond Beef, Beyond Meatballs, Beyond Breakfast Sausage Patties, Beyond Breakfast Sausage Links, Beyond Beef Crumbles, and Beyond Italian Sausage Crumbles. It sells plant-based products across the three leading meat platforms: beef, pork, and poultry.
For the fiscal third quarter ended October 1, 2022, BYND’s net revenues decreased 22.5% year-over-year to $82.50 million. Its gross loss came in at $14.84 million compared to a gross profit of $22.98 million in the prior-year period.
The company’s adjusted net loss and adjusted net loss per share widened 85.5% and 83.9% year-over-year to $101.68 million and $1.60, respectively. In addition, its adjusted EBITDA loss came in at $73.81 million, widening 100.8% year-over-year.
For the quarter ended December 31, 2022, BYND’s revenue is expected to decline 25.1% year-over-year to $75.37 million. Moreover, its EPS for fiscal 2022 and 2023 are expected to remain negative. It failed to surpass Street EPS estimates in each of the trailing four quarters. Over the past year, the stock has lost 81.7% to close the last trading session at $12.31.
BYND’s POWR Ratings reflect this bleak outlook. According to our rating system, it has an overall rating of F, which translates to a Strong Sell.
It has an F grade for Stability, Sentiment, and Quality and a D for Growth and Value. Within the Food Makers industry, it is ranked last out of 83 stocks. Click here to see BYND’s rating for Momentum.
DKNG shares were trading at $11.06 per share on Tuesday morning, down $0.33 (-2.90%). Year-to-date, DKNG has declined -2.90%, versus a -0.87% rise in the benchmark S&P 500 index during the same period.
About the Author: Shweta Kumari
Shweta's profound interest in financial research and quantitative analysis led her to pursue a career as an investment analyst. She uses her knowledge to help retail investors make educated investment decisions.
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