2 Stocks to Avoid This Month No Matter What

Because the Federal Reserve sees two interest rate hikes coming by late 2023, a year earlier than anticipated, the stock market is expected to remain volatile. Furthermore, the reopening of the economy is making the prospects of several pandemic-hit industries look bright, leaving investors with plenty of options in which to  invest for quick and bigger returns…

With several stocks currently trading at sky-high valuations and with rising inflation being a major concern, the chances of fundamentally weak stocks suffering big losses in the near term are high.

Given this backdrop, we don’t think it makes sense to invest in Snap Inc. (SNAP – Get Rating) and NIO Inc. (NIO – Get Rating). They are trading at lofty valuations with insufficient fundamental strength and growth prospects. So, we think these stocks could be among the major losers in the near term.

Snap Inc. (SNAP – Get Rating)

SNAP operates as a camera company. It offers Snapchat, a camera application with functionalities, such as Camera, Communication, Snap Map, Stories, and Spotlight, that enable people to communicate through short videos and images. The Venice, Calif. company also provides Spectacles and advertising products, including AR and Snap ads.

A lawsuit was filed against SNAP on behalf of its shareholders who purchased its shares between March 2, 2017, and May 15, 2017. It was alleged that the company withheld potentially negative information from investors about competition with Instagram during its  IPO. Consequently, SNAP paid $187 million earlier this year to settle the shareholder lawsuit.

SNAP’s operating loss increased 6% year-over-year to $303.61 million for its fiscal first quarter, ended March 31, 2021. Its net loss came in at $286.88 million compared to $305.94 million in the prior-year period. Its liabilities increased 24.4% sequentially to $3.35 billion. The company’s loss per share was $0.19 compared to $0.21 in the year-ago period.

In terms of forward Price-to-Cash Flow, SNAP’s 470.77x is 4,421.7% higher than the 10.41x industry average. The stock’s 254.43x forward EV/EBITDA  is 2,322% higher than the 10.51x industry average.

SNAP’s EPS is expected to be negative for the current quarter ending June 30, 2021.

SNAP’s poor prospects are apparent in its POWR Ratings. The company has an overall F rating, which translates to Strong Sell in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.

The stock has a D grade for Value, Stability and Quality. Click here to see the additional POWR ratings for SNAP (Momentum, Sentiment and Growth). It is ranked #68 of 71 stocks in the F-rated Internet industry.

NIO Inc. (NIO – Get Rating)

Headquartered in Shanghai, China, NIO designs, develops, manufactures, and sells smart electric vehicles (EVs). Its offerings include five-, six-, and seven-seater electric SUVs, and smart electric sedans. In addition, the company provides  energy and service packages to its users and offers power solutions, such as Power Home, which is a home charging solution.

On March 26, 2021, NIO announced that it would…

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