Losing stocks in 2023. Beware of losing money
2022 has been a rough year for the S&P 500, down nearly 20% year-to-date. The triple whammy of rising interest rates, soaring inflation and recession fears has hit rising stocks and investors should avoid Snap and Beltone as the selloff continues in 2023.
In sharp contrast to Wednesday’s article in which I singled out Occidental Petroleum (NYSE: NYSE: ) and Lockheed Martin (NYSE: LMT ) as winning stocks for the past two years to hedge against more downside volatility in the coming year, below I’ll look at two our favorites: the biggest losers in 2022 you should avoid as new disruptions await.
1. Snap
Performance since the beginning of the year: -81.5%
Market value: 14 billion
Snap (NYSE:SNAP) has seen its value collapse in 2022 due to various headwinds, such as slowing digital ad spending and increased competition from companies like TikTok. The ad-reliant social network has also struggled with Apple’s crackdown on ad tracking in its iOS apps.
In addition to deteriorating fundamentals, Snap has been adversely affected by a difficult economic environment of high interest rates, high inflation and fears of a looming recession.
After climbing to an all-time high of $83.34 in September 2021, Snap, which has fallen 81.5% year-to-date, quickly fell to a four-year low of $7.33 on October 21. Thursday, nearly 90% below its record high.
According to current estimates, the parent company of social messaging app Snapchat has a market capitalization of $14 billion, well above its peak of $136 billion.
There’s not much to love about Snap. Despite the one-year selloff, shares of Snap (NYSE: ) remain overvalued as they trade at more than 25 times this year’s sales, making them a less attractive option in the current market environment.
I expect advertising industry headwinds to pick up in 2023 as companies and small businesses continue to cut back on ad spending in a slowing economy.
This does not bode well for Snap’s monetization efforts, which will likely lengthen its path to profitability and increase execution risk.
As a result, I see the Santa Monica, Calif.-based company — which has managed to turn a profit just once since going public in 2017 — to endure another challenging year of slowing earnings and sales growth amid poor performance in its core advertising business.
With that in mind, Snap is vulnerable to further losses in the coming year as it continues to stumble on an uncertain macro outlook and deteriorating fundamentals resulting from privacy changes in Apple’s iOS and growing competition from Chinese video-sharing app TikTok.
2. Peloton
Performance since the beginning of the year: -74.2%
Market value: $3.1 billion
Beltone (NASDAQ:PTON) is considered one of the big winners of the 2020 COVID outbreak, and has since fallen out of favor due to a toxic combination of reduced demand for home fitness products, ongoing supply chain issues and concerns about a potential recession and higher federal interest rates.
Overall, expectations for tighter monetary policy weigh heavily on highly rated nonprofits as higher interest rates threaten to erode the value of their long-term cash flows.
Year-to-date, Peloton shares are down nearly 74% and are about 95% off their all-time high of $171.09 reached in January 2021. On October 3, they closed Thursday’s session at $9.21.
At current levels, the New York-based interactive fitness company, which sells stationary bikes and treadmills that allow monthly subscribers to participate in classes remotely via streaming media, has a market cap of $3.1 billion, compared with the highest estimate of almost 50 billion dollars. at the beginning of 2021
In my view, Peloton stock should suffer further turbulence in 2023 as the home exercise equipment maker faces a challenging environment as it navigates high levels of liquidity amid rising cost pressures and low operating margins.
Peloton has missed top estimates for six consecutive quarters, while falling short of revenue forecasts five times during that period, reflecting the negative impact of several headwinds on its business.
Peloton also struggled against a challenging macroeconomic backdrop of rising interest rates, accelerating inflation and slowing growth.
Beltone Stock Earnings
Looking ahead, Peloton’s management recently warned that a challenging macro environment could derail the company’s goal of breaking even in the second half of fiscal 2023.
The disappointing guidance tells me that Peloton is still struggling to deliver on its turnaround plan, adding to concerns about the struggling fitness equipment maker’s long-term growth prospects.
It’s hard for me to see Belton regaining its place in the post-pandemic world. Overall, I remain bearish on PTON and believe there are fundamental risks to its outlook, which could push the stock to new lows in the coming year.
