3 F-Rated Stocks to Sell Now Rather Than Later

The consumer price index (CPI) for October increased 0.4% sequentially and 7.7% over the last 12 months. This report has raised hopes that inflation is finally cooling.

However, it is far from the 2% target of the Fed. Although the pace of rate hikes might slow down, they are expected to continue for now. Moreover, the global economic outlook has soured. A Reuters poll showed that economists had downgraded their growth forecasts for key economies.

In addition, Harvard economist Kenneth Rogoff issued a dire warning about the U.S. economy, saying, “I worry that not only we’re going to get a mild recession, I think the chances that we’ve got a significant recession are really pretty high.”

Amid such macroeconomic headwinds and volatility, we believe fundamentally weak stocks Ginkgo Bioworks Holdings, Inc. (DNA), Affirm Holdings, Inc. (AFRM), and WeWork Inc. (WE) might be avoided now. These stocks are rated F (Strong Sell) in our proprietary POWR Ratings system.

Ginkgo Bioworks Holdings, Inc. (DNA)

DNA engages in the development of a platform for cell programming. Its platform is used to program cells to enable the biological production of products, such as novel therapeutics, food ingredients, and chemicals derived from petroleum.

On October 19, it was announced that DNA had completed acquiring Zymergen Inc. (ZY). Although this acquisition should enhance the company’s capability, its gains might be stretched over a long period.

DNA’s loss from operations came in at $646.91 million for the second quarter that ended June 30, 2022, up significantly year-over-year. Its net loss attributable to DNA stockholders came in at $668.83 million, up considerably year-over-year. In contrast, its net loss per share attributable to DNA common stockholders came in at $0.41, up significantly year-over-year.

Analysts expect DNA’s revenue to decrease 52.6% year-over-year to $70.37 million for the fiscal fourth quarter ending December 2022. EPS is expected to come in at a negative $0.16 for the same period. It has missed EPS estimates in all four trailing quarters.

Over the past year, the stock has lost 80.6% to close the last trading session at $2.64. It has lost 8.7% over the past month.

DNA’s bleak prospects are reflected in its POWR Ratings. The stock has an overall rating of F, which equates to a Strong Sell in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.

DNA has an F grade for Stability and Sentiment and a D for Growth, Value, and Quality. It is ranked last among 381 stocks in the F-rated Biotech industry.

Click here to see the additional POWR Ratings for DNA (Momentum).

Affirm Holdings, Inc. (AFRM)

AFRM operates a digital and mobile-first commerce platform internationally. The company’s platform provides point-of-sale payment solutions for consumers, merchant commerce solutions, and a consumer-focused app.

For the fiscal first quarter ended September 30, AFRM’s total operating expenses grew 49.1% from the year-ago quarter to $649.09 million. Operating loss came in at $287.47 million, up 73.1% year-over-year. Furthermore, the company’s net loss and net loss per share attributable to common stockholders for Class A and Class B came in at $251.27 million and $0.86, respectively.

The company expects revenue between $400 - $420 million for the fiscal second quarter and between $1.60 - $1.68 billion for the fiscal year 2023.

Analysts expect the AFRM’s EPS to decrease 63.7% year-over-year to a negative $0.93 in the fiscal second quarter (ending December 2022). In addition, the consensus EPS estimate of negative $3.26 for fiscal 2023 (ending June 2023) indicates a decline of 29.9% from the prior year.

The stock has plunged 17.6% over the past six months and 88.8% over the past year to close the last trading session at $14.99.

AFRM has an overall rating of F, equating to a Strong Sell in our proprietary POWR Ratings system.

AFRM has an F grade for Sentiment and Stability and a D for Momentum and Quality. AFRM is ranked #73 of 76 stocks in the Technology - Services industry.

Beyond what has been stated above, we have also given AFRM grades for Growth and Value. Get all AFRM ratings here.

WeWork Inc. (WE)

WE provide flexible workspace solutions to individuals and organizations worldwide. It delivers technology-driven turnkey solutions, flexible spaces, and community experiences. Its product offerings include Core space-as-a-service, WeWork On Demand, WeWork All Access, and WeWork Workplace.

WE recently reported closing about 40 underperforming locations in the United States, with most of the closures expected in November, as the company aims to cut costs and seeks to turn a profit.

WE’s total current assets came in at $866 million for the period ended September 30, 2022, compared to $1.47 billion for the period ended December 31, 2021.

For the nine months ended September 30, WE’s net cash provided by financing activities decreased 71.3% year-over-year to $407 million. Its cash, cash equivalents, and restricted cash at the end of the period came in at $467 million, down 4.5% from the prior-year period.

WE’s EPS is expected to come in at a negative $0.46 for the fiscal fourth quarter (ending December 2022).

Over the past year, the stock has lost 73% to close the last trading session at $2.60. It has declined 53.9% over the past six months.

WE’s poor prospects are reflected in its POWR Ratings. It has an overall F rating, equating to a Strong Sell in our proprietary rating system.

WE have an F grade for Stability and Quality and a D for Value, Sentiment, and Growth. In the F-rated Real Estate Services industry, it is ranked last among 42 stocks.

Click here to access the additional POWR Rating for Momentum for WE.

DNA shares were trading at $2.81 per share on Friday afternoon, up $0.17 (+6.44%). Year-to-date, DNA has declined -66.19%, versus a -15.35% rise in the benchmark S&P 500 index during the same period.

Anushka is an analyst whose interest in understanding the impact of broader economic changes on financial markets motivated her to pursue a career in investment research.

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