The resurgence of the COVID-19 cases due to the rapid spread of the highly contagious COVID-19 Delta variant has been fueling market volatility. Also contributing to investor nervousness is that…
the Federal Reserve could raise interest rates as soon as early 2023, but the timing regarding its tapering activities is still uncertain.
The prolonged period of loose monetary policy, in part, has led to stretched valuations for several fundamentally weak stocks. The stock market got a further boost from solid second-quarter earnings reports. However, along with the possible negative impact on the economic recovery of rising COVID-19 cases, concerns over high inflation have been fostering market volatility. The International Monetary Fund (IMF) warned that inflation could be persistent. As a result, several investors predict a market correction in the near term.
Against this backdrop, we think fundamentally weak stocks Royal Caribbean Group (RCL – Get Rating) and Bill.com Holdings, Inc. (BILL) look significantly overvalued at their current price levels and are due for a pullback. So, it’s best to avoid these two stocks now.
RCL is a Miami-based cruise company that operates 61 ships with an aggregate capacity of approximately 137,930 berths under the Royal Caribbean International, Celebrity Cruises, Azamara, and Silversea Cruises brands. It offers a range of itineraries for destinations that include Alaska, Asia, the Caribbean, Europe, and New Zealand.
On March 19, 2021, RCL completed the sale of its Azamara brand to Sycamore Partners. The deal included Azamara’s three-ship fleet and associated intellectual property.
RCL’s comprehensive loss was $1.30 billion for the second quarter, ended June 30, 2021, compared to $1.49 billion in the year-ago period. Its adjusted net loss for the quarter remained flat at $1.30 billion compared to the prior quarter. Also, its loss per share came in at $5.06 compared to $6.13 in the previous year.
In terms of forward non-GAAP EV/S ratio, RCL’s 20.26x is 1,275.7% higher than the 1.47x industry average. In terms of forward P/S, the stock’s 10.82x is 747.4% higher than the 1.28x industry average.
For the quarter ending September 30, 2021, analysts expect RCL’s revenue to decrease 2,267.4% year-over-year to $730.15 million. Its EPS is expected to remain negative in its fiscal year 2021. The stock has lost nearly 4.9% over the past month to close Friday’s trading session at $78.92.
It’s no surprise that RCL has an overall F rating, which equates to Strong Sell in our POWR Ratings system. In addition, the stock has an F grade for Value and Stability, and a D grade for Growth, Sentiment, and Quality.
Bill.com Holdings, Inc. (BILL)
BILL provides cloud-based software that digitizes and automates back-office financial operations for small- and midsize businesses worldwide. Its offerings include artificial intelligence (AI)-enabled financial software platforms and software-as-a-service (Saas), and cloud-based payments products. BILL is based in Palo Alto, Calif.
The company agreed on May 7, 2021, to…
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