Following the massive short squeezes experienced by GameStop Corporation (GME) and AMC Entertainment Holdings (AMC) earlier this year, meme stocks gained immense popularity. While discussion on social media led to many other fundamentally weak stocks witnessing skyrocketing price rallies, meme trading has attracted criticism from several analysts. In addition, allegations of a fraudulent trading scheme made by the U.S. Securities and Exchange Commission (SEC) has created some wariness and confusion related to investing in meme stocks.
The meme investing trend is still causing hedge funds’ conniptions. Hedge funds have lost billions of dollars in a battle for market supremacy with retail investors this year. Given that most meme stocks are overpriced, and it’s almost impossible to identify when to buy or sell them, we think investors should be judicious when picking a meme stock.
We believe meme stocks Beyond Meat, Inc. (BYND), Virgin Galactic Holdings, Inc. (SPCE), and Clover Health Investments, Corp. (CLOV), which possess weak fundamentals and growth prospects, are best avoided now. These stocks have been rated ‘Strong Sell’ by our proprietary rating system.
Beyond Meat, Inc. (BYND)
BYND in El Segundo, Calif., offers plant-based meat and products. The company operates under the Beyond Meat; Beyond Burger; Beyond Sausage; the Caped Steer Logo; The Cookout Classic; The Future of Protein, and various other segments. It operates through approximately 122,000 retail and foodservice outlets across grocery, club, natural retailer channels, and other food-away-from-home channels, including restaurants.
BYND’s total operating expenses increased 57.7% year-over-year to $65.95 million in its second fiscal quarter, ended July 3, 2021. The company’s loss from operations grew 127.8% from its year-ago value to $18.6 million. Its net loss rose 92.6% from its year-ago value to $19.65 million. Also, the company’s loss per share increased 93.8% year-over-year to $0.31.
BYND has failed to beat the consensus EPS estimates in each of the trailing four quarters. The company’s EPS is expected to decrease 88.3% in the current year. Although the stock has soared 5% in price over the past five days, it has lost 24.6% over the past nine months and 42.9% over the past year.
BYND’s POWR Ratings are consistent with this bleak outlook. The stock has an overall F rating, which equates to a Strong Sell in our proprietary rating system. The POWR Ratings assess stocks by 118 distinct factors, each with its own weighting.
Also, the stock has an F grade for Value, Sentiment, and Quality. We’ve also graded BYND for Growth, Momentum, and Stability. Click here to access all BYND’s ratings. BYND is ranked #82 of the 83 stocks in the C-rated Food Makers industry.
Virgin Galactic Holdings, Inc. (SPCE)
An integrated aerospace company, SPCE in Las Cruces, N. Mex develops, manufactures, and operates spaceships and related technologies for commercial human spaceflight and research and development payloads into space. In addition, the company designs and develops, manufactures, ground and flight tests, and executes post-flight maintenance of spaceflight vehicles.
Last month, a class-action lawsuit was filed in federal court against SPCE on behalf of purchasers of the company's securities on allegations of violations of federal securities laws. This action could negatively impact the company’s share price in the near term.
During the second quarter, ended June 30, 2021, SPCE’s operating loss increased 17.2% year-over-year to $73.9 million. The company’s net loss grew 30.7% from its year-ago value to $94.04 million. Its total comprehensive loss rose 30.7% from the prior-year quarter to $94.06 million. Also, the company’s loss per share increased 14.7% year-over-year to $0.39.
SPCE’s EPS is estimated to decline 20% in the current year. The company has failed to surpass the consensus EPS in three of the trailing four quarters. Its stock has fallen 37% in price over the past three months and 34.2% over the past nine months.
SPCE’s poor prospects are also apparent in its POWR Ratings. The stock has an overall F rating, which equates to Strong Sell in our proprietary rating system. The stock also has an F grade for Sentiment, Stability, and Quality.
In addition to the POWR Rating grades I’ve just highlighted, one can see SPCE’s ratings for Growth, Value, and Momentum here. SPCE is ranked last of 31 stocks in the F-rated Airlines industry.
Clover Health Investments, Corp. (CLOV)
CLOV is a Medicare advantage insurer in the United States. The Franklin, Tenn.-based company offers a software platform, the Clover Assistant, which aggregates patient data from across the health ecosystem and provides primary care physicians (PCPs). In addition, it provides Preferred Provider Organization (PPO) and Health Maintenance Organization (HMO) health plans for Medicare-eligible consumers through its software platform.
For the second quarter, ended June 30, 2021, CLOV’s total revenues increased 139.7% year-over-year to $412.47 million. However, the company’s total operating expenses grew 299.1% from the year-ago value to $594.33 million. Its loss from operations came in at $181.86 million, compared to $23.17 million in income from operations in the second quarter of 2020. Also, the company’s net loss came in at $317.61 million for the quarter, versus $5.4 million in net income in the prior-year quarter.
CLOV’s EPS is expected to remain negative for the current year and next year. Though the stock has surged 7.6% in price over the past six months, it has declined 40.3% over the past year.
It’s no surprise that CLOV has an overall F rating, which equates to a Strong Sell in our POWR Rating system. Also, the stock has an F grade for Stability and Sentiment, and a D for Growth.
Click here to see the additional POWR Ratings for CLOV (Momentum, Value, and Quality). CLOV is ranked last of 11 stocks in the B-rated Medical – Health/Insurance industry.
Click here to checkout our Healthcare Sector Report for 2021
BYND shares were trading at $106.10 per share on Monday morning, up $0.46 (+0.44%). Year-to-date, BYND has declined -15.12%, versus a 20.28% rise in the benchmark S&P 500 index during the same period.
About the Author: Priyanka Mandal
Priyanka is a passionate investment analyst and financial journalist. After earning a master's degree in economics, her interest in financial markets motivated her to begin her career in investment research.3 Meme Stocks to Avoid in Q4 According to the POWR Ratings appeared first on StockNews.com