The stock market is about to witness its worst first half in decades this year. The S&P 500 is down more than 20% year-to-date. The Federal Reserve’s further interest-rate hikes to bring prices down could sharply raise borrowing costs, triggering an economic slump.
Morgan Stanley Wealth Management’s Lisa Shalett said that the odds of the U.S economy tipping into a recession this year have doubled in recent weeks to over 50%.
For investors, this indicates that the S&P 500 could drop another 10% from current levels. She also said, “We don’t think the cyclical bear market can end until earnings are marked down, which makes profit reports for the second and third quarters critical.”
Amid this backdrop, it could be wise to avoid stocks possessing high short interest. Short interest is the number of shares that have been sold short but have not yet been covered. The short percentage of the float for a stock in a long-term uptrend is typically set at 25%. However, a high valuation might be a red flag.
Arcimoto, Inc. (FUV), Beyond Meat, Inc. (BYND), and Nikola Corporation (NKLA) were significantly shorted by the investors, pushing their respective short interest above 35%, which implies a bearish sentiment. Moreover, these stocks are rated Strong Sell in our POWR Ratings system.
Arcimoto, Inc. (FUV)
Headquartered in Eugene, Oregon, FUV designs, develops, manufactures, sells, and rents three-wheeled electric vehicles in the United States. Its flagship product is the Fun Utility Vehicle (FUV), which is used for everyday consumer trips.
For the first quarter ending March 31, 2022, FUV’s revenue decreased 53.4% year-over-year to $0.65 million. Its loss from operations increased 69% from its year-ago value to $12.93 million, while its net loss grew 173% from its prior-year quarter to $12.95 million.
Analysts expect FUV's EPS to remain negative in the second quarter ending June 2022. The company's shares have plunged 78.8% over the past year. FUV has a short interest of 42%.
FUV'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.
FUV is rated an F grade for Quality, Growth, and Stability. Within the F-rated Auto & Vehicle Manufacturers industry, it is ranked #66 of 66 stocks.
To see additional POWR Ratings for Value, Sentiment, and Momentum for FUV, click here.
Beyond Meat, Inc. (BYND)
BYND manufactures, markets, and sells plant-based meat products in the United States and internationally. The company sells a range of plant-based meat products across the platforms of beef, pork, and poultry.
For the first quarter ending April 2, 2022, BYND’s loss from operations increased 296.14% year-over-year to $97.63 million. The company’s net loss grew 271.7% from its prior-year quarter to $99.78 million, while its loss per share increased 267.4% from its year-ago value to $1.58.
The net cash used in operating activities increased 438.9% from its previous period to $165.21 million for the quarter ending April 2, 2022.
The consensus EPS estimate is expected to remain negative in the second quarter ending June 2022. The stock has declined 83% over the past year. BYND has a short interest of 40.2%.
BYND's weak fundamentals are reflected in its POWR ratings. The stock has an overall F rating, which equates to a Strong Sell. The stock also has an F grade for Growth, Value, and Stability. In the B-rated Food Makers industry, it is ranked last of 88 stocks.
In addition to the POWR Ratings grades I have just highlighted, you can see the BYND rating for Momentum, Sentiment, and Quality here.
Nikola Corporation (NKLA)
NKLA operates as a technology innovator and integrator that works to develop energy and transportation solutions. It has two operational business units, Truck and Energy. The Truck business unit develops and commercializes battery hydrogen-electric and battery-electric semi-trucks for the trucking sector. The Energy business unit develops and constructs a network of hydrogen fueling stations.
For the first quarter ending March 31, 2022, NKLA’s loss from operations grew 25.5% year-over-year to $151.31 million. Its net loss grew 27.2% from its year-ago value to $152.94 million, while its loss per share increased 19.4% from its prior-year quarter to $0.37.
The net cash used in operating activities increased 121.6% from its previous period to $131.32 million for the quarter ending April 2, 2022.
The consensus EPS estimate is expected to remain negative in the second quarter ending June 2022. The company's shares have plunged 77% over the past year. NKLA has a short interest of 37%.
NKLA'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 proprietary rating system. It has an F grade for Stability and Quality and a D grade for Sentiment. NKLA is ranked #60 in the Auto & Vehicle Manufacturers industry.
Click here to see the additional POWR Ratings for NKLA (Quality, Value, and Momentum).
FUV shares were trading at $3.11 per share on Wednesday afternoon, down $0.22 (-6.61%). Year-to-date, FUV has declined -60.03%, versus a -19.39% 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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