3 Beaten-Down Stocks to Avoid in July 2022

With inflation at a four-decade high, the Fed will likely hike rates 75 basis points this month. This and many more possible interest rate hikes this year have increased the odds of the economy tipping into a recession. 

Moreover, a survey by the University of Michigan showed consumer feelings about the economy plummeted by 14.4% in June, marking a record low for the report. Therefore, the market is expected to remain highly volatile.

Given this backdrop, we think it could be wise to avoid beaten-down stocks The Walt Disney Company (DIS), Teladoc Health, Inc. (TDOC), and Affirm Holdings, Inc. (AFRM), which do not have enough fundamental strength to rebound anytime soon.

The Walt Disney Company (DIS)

DIS operates as an entertainment company worldwide through two segments, Disney Media and Entertainment Distribution; and Disney Parks, Experiences, and Products.

For the fiscal quarter ended April 2, 2022, DIS’ net income from continuing operations decreased 48.5% year-over-year to $470 million. Its EPS for the period declined 48% from the prior-year quarter to $0.26. Moreover, the company missed the consensus EPS estimates in two of the trailing four quarters.

In terms of its forward non-GAAP P/E, DIS is currently trading at 25.03x, 45.7% higher than the industry average of 17.18x. Its forward Price/Sales multiple of 2.15 is 58.5% higher than the industry average of 1.36.

The stock has declined 42.4% over the past year and 33.6% over the past six months to close the last trading session at $99.61.

DIS’ POWR Ratings reflect this bleak outlook. The stock has an overall rating of D, equating to Sell in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.

DIS has a Value and Quality grade of D. In the 18-stock F-rated  Entertainment - Media Producers industry; it is ranked #12. Click here to see the additional POWR Ratings for DIS (Growth, Stability, Momentum, and Sentiment).

Teladoc Health, Inc. (TDOC)

TDOC provides virtual healthcare services in the United States and internationally.

For the fiscal quarter ended March 31, 2022, TDOC’s total expenses increased 1,243.9% year-over-year to $7.23 billion. Loss from operations increased 7,776.2% from the prior-year period to $6.67 billion.

The company’s net loss came in at $6.67 billion, up 3,243.1% from the prior-year period, while its net loss per share increased 3,074% to $41.58. Street expects its EPS to remain negative at least this year.

In terms of its forward EV/EBITDA, TDOC is currently trading at 29.86x, 122.4% higher than the industry average of 13.43x. Its forward Price/Cash Flow multiple of 26.18 is 57% higher than the industry average of 16.67.

The stock has slumped 72.8% over the past year and 36.3% over the past three months to close the last trading session at $41.15.

It’s no surprise that TDOC has an overall F rating, which translates to Strong Sell in our POWR Rating system. In addition, TDOC has an F grade in Sentiment and a D in Value, Momentum, Stability, and Quality.

The stock is ranked #81 of 83 stocks in the Medical - Services industry. Click here to see additional TDOC ratings for Growth.

Affirm Holdings, Inc. (AFRM)

AFRM operates a platform for digital and mobile-first commerce in the United States and Canada.

For the fiscal quarter ended March 31, 2022, AFRM’s operating loss increased 8.2% year-over-year to $226.55 million. Total operating expenses increased 32.1% from the prior-year quarter to $581.31 million, while the net loss came in at $54.67 million.

Analysts expect AFRM’s EPS to come in at a negative $0.72 for the quarter ended June 2022 and a negative $0.60 for the quarter ending September 2022. AFRM missed the consensus EPS estimates in three of the trailing four quarters.

In terms of its forward EV/Sales, AFRM is currently trading at 6.98x, 153.2% higher than the industry average of 2.76x. Its forward Price/Sales multiple of 5.57 is 98.3% higher than the industry average of 2.81.

AFRM’s shares have declined 83.2% over the past nine months to close the last trading session at $26.03.

AFRM’s poor prospects are reflected in its POWR Ratings. The stock has an overall F rating, equating to a Strong Sell in our proprietary rating system.

AFRM also has a Stability grade of F and a Value, Quality, and Sentiment grade of D. It is ranked #79 out of the 80 stocks in the Technology - Services industry. Click here to see the additional POWR Ratings for Growth and Momentum for AFRM.

DIS shares were trading at $102.77 per share on Wednesday afternoon, up $3.16 (+3.17%). Year-to-date, DIS has declined -33.65%, versus a -16.61% rise in the benchmark S&P 500 index during the same period.

Komal's passion for the stock market and financial analysis led her to pursue investment research as a career. Her fundamental approach to analyzing stocks helps investors identify the best investment opportunities.

More...