Barring the sell-off earlier this year, most tech stocks witnessed a blistering rally over the past year thanks to an increased demand for technology products and services amid the COVID-19 pandemic. However, not all stocks gained based on their business growth. Some fundamentally weak stocks took Wall Street by storm thanks to short squeezes triggered by young or novice investors on Reddit’s r/WallStreetBets (WSB) chatroom.
Following the forum’s huge success in squeezing short sellers out of their positions in GameStop (GME) earlier this year, by betting against them and buying the stock despite GameStop’s weak financials and growth prospects, WSB has targeted many other fundamentally weak stocks that possess high short interest and benefited by causing short squeezes in them too.
Palantir Technologies (PLTR), BlackBerry Limited (BB), and MicroVision, Inc. (MVIS) are among the top 10 most discussed stocks on the Reddit forum. We think these stocks are overvalued at their current price levels considering their weak financials and bleak growth prospects. So, they are best avoided now.
Palantir Technologies (PLTR)
PLTR offers a suite of software applications for integrating, visualizing, and analyzing information. The company operates through two segments—commercial and government. It has built two software platforms: Palantir Gotham and Palantir Foundry. The software allows analysts within and between organizations to collaborate and to analyze large quantities of data.
In February, PLTR announced a multi-million-dollar expansion of its relationship with 3M Company (MMM), an American multinational conglomerate that operates in the worker safety, health care, and consumer goods areas. 3M will use Palantir’s Foundry platform to support its digital transformation in supply chain alerts, demand forecasting and business planning.
Also in February, PLTR and International Business Machines Corporation (IBM) partnered to merge hybrid cloud, artificial intelligence (AI), data processing, and operational technology in a new enterprise offering. The new solution, Palantir for IBM Cloud Pak for Data, is designed to l reduce data silos and cut out the technical expertise generally required to make use of AI analysis.
PLTR is scheduled to announce its fiscal year 2021 first quarter financial results on May 11, before the market opens. For the fourth quarter, ended December 31, 2020, PLTR’s loss from operations was $156.57 million, which represents a 6.2% rise year-over-year. Its net loss was $148.34 million and its loss per share was $0.08. Its total liabilities and shareholders’ equity increased 68.8% year-over-year to $2.69 million, as of December 31, 2020.
Analysts expect the stock’s EPS to be $0.04 for the next quarter, ending September 30, 2021, which represents a 40.9% decline year-over-year. PLTR’s stock price has gained 118.1% over the past six months and lost 38.8% over the past three months. It ended yesterday’s trading session at $23.88, which is 46.9% below its 52-week high at $45.
PLTR’s weak fundamentals are reflected in its POWR Ratings. The stock has an overall D rating, which equates to Sell in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
The stock has a D grade for Value and Stability also. We have also graded PLTR for Growth, Momentum, Sentiment, and Quality. Click here to access all PLTR’s ratings.
PLTR is ranked #9 of 12 stocks in the F-rated Software – SAAS industry.
Click here to check out our Software Industry Report for 2021
BlackBerry Limited (BB)
BB leverages artificial intelligence (AI) and machine learning to deliver solutions to enterprises and governments in the areas of cybersecurity, safety and data privacy, and endpoint security management, encryption, and embedded systems. The company operates through three segments—BlackBerry Spark, BlackBerry IoT Solutions, and BlackBerry IP Licensing.
Several lawsuits have been filed against BB on allegations of securities fraud or other unlawful business practices. On April 13, BB and IBM established a new partnership to bring BB’s BlackBerry Spark platform to organizations across Canada. IBM and BB hope to bring best-in-class solutions to the Canadian market at a time when uncompromised security, productivity and safety are most needed most.
On April 12, the Canadian government selected BB to improve its secure productivity and secure communications needs. Shared Services Canada (SSC), which delivers digital services to Canada’s governmental organizations, signed a multi-year agreement with BB that will give it access to BlackBerry Spark’s unified endpoint management (UEM) and BlackBerry SecuSUITE.
However, BB’s financial results are not promising. Its non-GAAP revenue has declined 26.1% year-over-year to $215 million for its fiscal year 2020 fourth quarter, ended February 28. The company’s non-GAAP gross profit has declined 29.1% year-over-year to $158 million. Its non-GAAP income came in at $16 million for the quarter, down 68.6% from the prior-year period. And, its non-GAAP EPS was $0.03, which represented a 66.7% year-over-year decline.
Analysts expect the company’s EPS to be negative for the current quarter, ending May 31, which represents a 350% decline year-over-year. Also, the $171.25 million revenue estimate for the current quarter represents a 20% year-over-year decline. Analysts expect the stock to decline at a rate of 21.9% per annum over the next five years.
BB has gained 118.1% over the past year but has lost 40.1% year-to-date. It ended yesterday’s trading session at $9.29, which is 67.7% below its 52-week high.
BB’s POWR Ratings reflect this bleak outlook. The stock has an overall D rating, which equates to Sell in our proprietary ratings system.
The stock also has an F grade for Sentiment, and a D grade for Stability and Quality. Click here to see the additional POWR Ratings for BB (Growth, Value, and Momentum).
BB is ranked #23 in the D-rated Telecom – Domestic industry.
MicroVision, Inc. (MVIS)
MVIS develops PicoP laser beam scanning (LBS) technology. The company develops products for interactive projection, consumer light detection and ranging (LiDAR), automotive LiDAR, and augmented and mixed reality. It sells its products primarily to original equipment manufacturers and original design manufacturers.
In February, MVIS completed a $50 million equity offering agreement with Craig-Hallum Capital Group LLC. The company issued 2.5 million shares of its common stock, raising $48.7 million in net proceeds. It hopes to solidify its balance sheet with the funding and achieve its previously announced goal of producing a best-in-class LiDAR sensor with velocity field output by April 2021.
MVIS is scheduled to announce its fiscal year 2021 first quarter financial results on April 29, after the market closes. For the fourth quarter, ended December 31, 2020, MVIS’ total revenue was $395,000, which represents a 1065.8% decline from the prior-year period. The company’s loss from operations has increased 8.7% year-over-year to $3.56 million. Its net loss was $3.57 million for the quarter, up 8.7% from the year-ago period. Its loss per share was $0.02. And its total liabilities and shareholders’ equity increased 77.5% year-over-year to $21.01 million, as of December 31, 2020.
Analysts expect the stock’s EPS to be negative for its fiscal year 2021. MVIS has gained 7146% over the past year and 234% year-to-date. It ended yesterday’s trading session at $20.16, which is 28% below its 52-week high.
It’s no surprise that MVIS has an overall F rating, which equates to Strong Sell in our POWR Ratings system.
The stock also has an F grade for Value, Stability, and Sentiment. In addition to the POWR Ratings grades we’ve just highlighted, one can see MVIS’ ratings for Growth, Momentum, and Quality here.
MVIS is ranked #44 of 44 stocks in the Technology – Electronics industry.
PLTR shares were trading at $23.80 per share on Wednesday morning, down $0.08 (-0.34%). Year-to-date, PLTR has gained 1.06%, versus a 12.17% rise in the benchmark S&P 500 index during the same period.
About the Author: Sweta Vijayan
Sweta is an investment analyst and journalist with a special interest in finding market inefficiencies. She’s passionate about educating investors, so that they may find success in the stock market. More…
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