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2 Stocks to Unload From Your Portfolio Now if You Haven’t Already

The stubbornly high inflation and the Fed’s aggressive attempts to tame it are likely to keep the market under pressure. As the odds of recession increase, it could be wise to unload fundamentally weak stocks Carvana (CVNA) and Tellurian (TELL) if you haven’t already. Keep reading...

The Consumer Price Index (CPI) rose 8.2% year-over-year and is still lingering near the highest levels since the early 1980s. The persistently high inflation will likely keep the Fed on track with its aggressive rate hikes.

President Biden and other members of his administration have continued to insist a recession is still avoidable. However, Jeff Bezos, founder of retail giant, Inc. (AMZN), recently joined the growing chorus of business leaders who are warning the U.S. economy is spiraling toward a debilitating recession.

Moreover, the IMF predicts global growth will slow to 2.7% in the next year, 0.2 percentage points lower than its July forecast, and anticipates 2023 will feel like a recession for millions worldwide.

Given the uncertain economic and market conditions, we think investors should unload fundamentally weak stocks Carvana Co. (CVNA) and Tellurian Inc. (TELL) if they haven’t already.

Carvana Co. (CVNA)

CVNA operates an e-commerce platform for buying and selling used cars in the United States. The company’s platform allows consumers to research and identify a vehicle, inspect it using 360-degree vehicle imaging technology, obtain financing and warranty coverage, purchase the vehicle, and schedule delivery or pick-up, all from their desktop or cell phone.

CVNA’s forward Price/Book multiple of 11.59 is 397.6% higher than the industry average of 2.33.

For the fiscal second quarter that ended June 30, 2022, CVNA’s selling, general, and administrative expenses amounted to $721 million, up 53.4% year-over-year. The company’s gross profit declined 28.3% year-over-year to $396 million. Its adjusted EBITDA declined 313.4% year-over-year to negative $232 million. Its loss per share came in at $2.35, compared to an EPS of $0.26 in the year-ago period.

Analysts expect CVNA’s EPS for the current fiscal year ending December to decline 428.7% year-over-year to negative $8.62.

The stock has plunged 93.5% year-to-date to close its last trading session at $14.99. The stock has fallen 51.6% over the past month.

CVNA’s POWR Ratings are consistent with its bleak outlook. The company has an overall rating of F, which translates to a Strong Sell in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.

It also has an F grade for Growth, Stability, Sentiment, and Quality. Within the F-rated Internet industry, CVNA is ranked last out of the 64 stocks.

To see CVNA’s ratings for Value and Momentum, click here.

Tellurian Inc. (TELL)

TELL is a natural gas company focused on developing a natural gas production portfolio. The company produces liquefied natural gas (LNG) and engages in building up infrastructure assets.

On September 19, TELL announced that due to uncertain conditions in the high-yield market, it has withdrawn its previously announced public offering consisting of 11.25% senior secured notes due 2027 and warrants to purchase shares of its common stock.

In terms of its forward EV/EBITDA, TELL is currently trading at 15.31x, 173.1% higher than the industry average of 5.60x.

For the second quarter ended June 30, TELL’s net loss came in at $35 thousand. For the six months ended June 30, TELL’s net cash used in operating activities increased 169.7% year-over-year to $83.50 million, while the net cash used in investing activities rose 2,251.7% from the prior-year period to $158.74 million.

TELL’s consensus EPS estimate of negative $0.19 for the fiscal first quarter ending March 2023 represents a decline of 35.7% year-over-year. Similarly, the consensus revenue estimate of $133.83 million for the same quarter represents an 8.9% fall from the prior-year quarter.

The stock declined 52.9% over the past six months to close its last trading session at $2.75. The stock has dropped 29.5% over the past month.

It is no surprise that TELL has an overall F rating, equating to a Strong Sell in our proprietary rating system. It also has an F grade for Value, Stability, and Quality. The stock is ranked #92 in the 94-stock Energy – Oil & Gas industry.

Click here to see the additional POWR Ratings for TELL for Growth, Momentum, and Sentiment.

CVNA shares were trading at $14.31 per share on Thursday afternoon, down $0.68 (-4.54%). Year-to-date, CVNA has declined -93.83%, versus a -22.31% rise in the benchmark S&P 500 index during the same period.

About the Author: Kritika Sarmah

Her interest in risky instruments and passion for writing made Kritika an analyst and financial journalist. She earned her bachelor's degree in commerce and is currently pursuing the CFA program. With her fundamental approach, she aims to help investors identify untapped investment opportunities.


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