After a volatile week, all the major U.S. benchmark indices bounced back ahead of a key July labor market report. The S&P 500 finished at a new all-time high of 4,429.10 on Thursday, as energy and travel stocks recovered after struggling over the past couple of weeks on investors’ concerns over the rapid spread of the Delta variant of the coronavirus…
While the major stock market indexes indicate a bullish sentiment, not all popular stocks are good bets now. Although the social-media-hype led to the skyrocketing rally of some stocks, their weak fundamentals and financials could trigger a brutal decline in their share prices.
Popular meme stocks NIO Inc. (NIO – Get Rating), AMC Entertainment Holdings, Inc. (AMC – Get Rating), and Sundial Growers Inc. (SNDL) enjoyed the limelight solely because of the social-media hype. However, since their current price levels do not match their bleak growth potential and underlying fundamentals, we believe these stocks are best avoided now.
NIO Inc. (NIO – Get Rating)
NIO is a China-based manufacturer and seller of smart, high-performance electric vehicles. It is involved in producing smart electric sedans and five, six, and seven-seater electric SUVs. In addition, the company provides energy and service packages, pick up, charging, and return services, as well as battery swapping services.
In July, the company delivered 7,931 vehicles, compared to 8,083 vehicles in June 2021. Its cumulative deliveries of the ES8, ES6, and EC6 stood at 125,528 vehicles as of July 31, 2021. NIO’s five-seater high-performance premium smart electric SUV deliveries reached 3,669 in July, compared to 3,775 in June.
NIO’s vehicle sales increased 489.8% year-over-year to RMB7,405.8 million ($1,130.3 million) in the first quarter ended March 31, 2021. However, the company’s non-GAAP loss from operations came in at RMB199.4 million ($30.4 million), and non-GAAP net loss amounted to RMB 354.6 million ($54.1 million). Its non-GAAP loss per share stood at RMB0.23 ($0.04) over this period. Also, NIO’s selling, general, and administrative expenses amounted to RMB1,197.2 million ($182.7 million), representing an increase of 41.1% from the first quarter of 2020.
Analysts expect NIO’s EPS to decline at the rate of 0.2% per annum over the next five years. While the stock has gained 227.6% over the past year, it has declined 7.5% year-to-date and 21.7% over the past six months. And it is currently trading 31.9% below its 52-week high of $66.99, indicating short-term bearishness.
NIO’s POWR Ratings are consistent with this bleak outlook. The stock has an overall rating of F, which translates to a Strong Sell in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
NIO has a C grade for Growth, D for Sentiment, and an F for Stability. Of the 57-stocks in the C-rated Auto & Vehicle Manufacturers industry, it is ranked #46.
In addition to the POWR Ratings grades I’ve just highlighted, you can see the NIO ratings for Value, Momentum, and Quality.
AMC Entertainment Holdings, Inc. (AMC – Get Rating)
Based in Leawood, Kansas, AMC is one of the largest movie theater chains in the world. The company offers movie screening, theatrical exhibitions, online ticket booking, food distribution, and other related services. It operated approximately 1000 theatres and 10,700 screens in the United States and worldwide as of March 12, 2021.
In June, AMC agreed with Mudrick Capital Management, L.P. to…
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