The rapid spread of the COVID-19 Delta variant and an inflationary environment have been worrying investors regarding the pace of economic recovery. In addition, consumer sentiment last week fell to a pandemic-era low. However, there exists the potential for the Federal Reserve to raise interest rates as soon as early 2023, and it recently indicated its willingness to reduce asset purchases before the end of the year.
Impressive second-quarter corporate earnings and the Senate’s passage of a$1 trillion infrastructure bill have been helping the major stock market indexes hover near their all-time highs. This, in part, has led to stretched valuations for several popular stocks with weak fundamentals.
Ultra-Popular stocks DoorDash, Inc. (DASH), Palantir Technologies Inc. (PLTR), and Aurora Cannabis Inc. (ACB) are examples. They look significantly overvalued at their current price levels and could be due for a price retreat. So, we think it best to avoid these three stocks now.
DoorDash, Inc. (DASH)
San Francisco-based DASH operates a logistics platform that connects merchants, consumers, and dashers. In addition, it offers DoorDash marketplace, which provides an array of services that enable merchants to solve mission-critical challenges; DoorDash Drive, a white-label logistics service; and DoorDash Storefront that allows merchants to offer consumers on-demand access to e-commerce.
DASH’s revenue increased 83.1% year-over-year to $1.24 billion for its fiscal second quarter, ended June 30, 2021. However, the company’s total costs and expenses increased 106% year-over-year to $1.33 billion. In comparison, its net loss for the quarter was $102 million compared to $23 million in net income in the year-ago period.
In terms of forward non-GAAP P/E, DASH’s 617.34x is 4,076.9% higher than the 14.78x industry average. The stock’s 213.61x forward EV/EBITDA is 1,953.9% higher than the 10.40x industry average.
Analysts expect DASH’s revenue to increase 54.7% year-over-year to $4.46 billion in its fiscal year 2021. However, the company’s EPS is expected to remain negative in fiscal 2021 and 2022. The stock has lost 11.6% over the past six months to close yesterday’s trading session at $182.06.
DASH’s poor prospects are apparent in its POWR Ratings also. The stock has an overall rating of D, which equates to a Sell in our proprietary rating system. The POWR Ratings assess stocks by 118 distinct factors, each with its own weighting.
It has a D grade for Growth, Value, Stability, and Sentiment. Click here to see the additional POWR ratings for DASH (Momentum and Quality). It is ranked #38 of 42 stocks in the D-rated Internet – Services industry.
Palantir Technologies Inc. (PLTR)
PLTR builds and deploys software platforms for the intelligence community in the U.S. to assist in counterterrorism investigations and operations. The Palo Alto, Calif., company provides Palantir Gotham, a software platform for government operatives in the defense and intelligence sectors. It also offers Palantir Foundry, a platform that transforms organizations’ operations by creating a central operating system for their data.
PLTR’s operating loss increased 47.4% year-over-year to $146.15 million for its fiscal second quarter, ended June 30, 2021. The company’s net loss grew 127.5% year-over-year to $123.47 million in the quarter. Its loss per share for the quarter came in at $0.07, versus $0.10 in the year-ago period.
In terms of forward P/CF, PLTR’s 268.44x is 1,147.4% higher than the 21.52x industry average. Its 31.46x forward P/S is 717.1% higher than the 3.85x industry average.
The company’s revenue is expected to increase 36.8% year-over-year to $1.49 billion in its fiscal year 2021. However, analysts expect PLTR’s EPS to decrease 55.6% for the quarter ending September 30, 2021, and 20% in its fiscal year 2021. The stock has lost 16.7% in price over the past six months to close yesterday’s trading session at $24.16.
PLTR’s POWR Ratings are consistent with this bleak outlook. The stock has an overall D rating, which equates to a Sell in our proprietary rating system. In addition, the stock has an F grade for Value, and a D grade for Stability.
Click here to see PLTR’s ratings for Momentum, Quality, Growth, and Sentiment as well. In addition, PLTR is ranked #13 of 16 stocks in the F-rated Software – SAAS industry.
Click here to check out our Software Industry Report for 2021
Aurora Cannabis Inc. (ACB)
ACB produces and distributes medical cannabis products worldwide. It is vertically integrated and horizontally diversified across various segments of the cannabis value chain. The Calgary, Canada, company has multiple strains of dried cannabis, cannabis oil and capsules, and topical kits for medical patients. Its brand portfolio includes Aurora, AltaVie, MedReleaf, and CanniMed.
ACB’s net revenue decreased 25% year-over-year to CAD55.16 million ($43.23 million) for its fiscal third quarter ended March 31, 2021. Its loss from operations grew 89.4% year-over-year to CAD142.96 million ($112.03 million), while its net loss increased 18.2% year-over-year to CAD164.65 million ($129.04 million). The company’s loss per share came in at CAD0.85 ($0.67), versus CAD1.40 ($1.10) in the prior year period.
In terms of forward EV/S, ACB’s 6.63x is higher than the 6.36x industry average.
ACB’s revenue is expected to decline 2.5% for the quarter ending September 30, 2021, and 5.8% in its fiscal year 2021. Furthermore, analysts expect its EPS to remain negative in its fiscal years 2021 and 2022. The stock has lost 47.3% in price over the past six months to close yesterday’s trading session at $6.44.
ACB’s weak fundamentals are reflected in its POWR Ratings. The stock has an overall F rating, which translates to a Strong Sell in our proprietary rating system. It has an F grade for Sentiment, and a D grade for Value, Momentum, Stability, and Quality.
Click here to see ACB’s rating for Growth also. In addition, ACB is ranked last of 217 stocks in the F-rated Medical – Pharmaceuticals industry.
Click here to checkout our Healthcare Sector Report for 2021
DASH shares were trading at $184.42 per share on Friday afternoon, up $2.36 (+1.30%). Year-to-date, DASH has gained 29.19%, versus a 19.33% rise in the benchmark S&P 500 index during the same period.
About the Author: Nimesh Jaiswal
Nimesh Jaiswal’s fervent interest in analyzing and interpreting financial data led him to a career as a financial analyst and journalist. The importance of financial statements in driving a stock’s price is the key approach that he follows while advising investors in his articles. More…
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