5 Ultra-Popular Stocks Down More Than 25% Over the Last 3 Months

Despite witnessing a strong economic recovery in the first half of the year, factors like the resurgence of COVID-19 cases, rising inflation, a troubled infrastructure bill, the debt ceiling, and supply chain constraints have caused immense market uncertainty. As a result, September was the worst month for major U.S. benchmark indexes since March 2020.

During this uncertain time, it’s wise to stay away from overvalued stocks.  Retail investor favorites NIO Inc. (NIO), AMC Entertainment Holdings, Inc. (AMC), Virgin Galactic Holdings, Inc. (SPCE), ContextLogic Inc. (WISH), and Sundial Growers Inc. (SNDL) are still trading at lofty valuations, which is why I recommend that investors avoid buying the dips in these stocks.

Today I’ll analyze each of these five stocks, which are each down more than 25% over the past three months, to illustrate why I believe investors should think twice before adding them to their portfolios. 

NIO Inc. (NIO)

Known as the ‘Tesla of China,’ NIO designs, manufactures, and sells smart and connected EVs integrated with next-generation technologies and artificial intelligence. The company’s products include its EP9 supercar and ES8 7-seater SUV. It provides home charging, power express valet service, and other power solutions that include access to public charging, access to power mobile charging trucks, and battery swapping.

On May 24, 2021, NIO entered into manufacturing agreements with Jianghuai Automobile Group Co., Ltd. (JAC) and their joint venture Jianglai Advanced Manufacturing Technology (Anhui) Co., Ltd., to continue manufacturing the ES8, ES6, EC6, ET7, and potentially other NIO models in the pipeline. JAC will expand its annual production capacity to 240,000 units, and Jianglai will be responsible for parts assembly and operation management. This should allow NIO to benefit from economies of scale in the future.

For its fiscal second quarter ended June 30, 2021, NIO’s non-GAAP loss from operations came in at RMB511.94 million ($79.41 million), representing a 54.1% decline from the prior-year period. While its non-GAAP net loss decreased 70.3% year-over-year to RMB335.79 million ($52.09 million), its non-GAAP loss per ADS decreased 80.6% to RMB0.21 ($0.03).

Analysts expect NIO’s EPS to remain negative in the upcoming quarters of the current year and next year. The stock’s EPS is expected to decline at a marginal rate per annum over the next five years. Over the past three months, the stock has lost 33.7% and closed yesterday’s trading session at $167.13.

In terms of forward EV/Sales, NIO is currently trading at 9.60x, 567.5% higher than the 1.44x industry average. In terms of forward Price/Sales, NIO is currently trading at 9.74x, 714.3% higher than the industry average of 1.20x.

NIO’s weak prospects are reflected in its POWR Ratings. The stock has an overall rating of F, equating 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 an F grade for Stability, and a D grade for Value, Sentiment, and Quality. In the 63-stock D-rated Auto & Vehicle Manufacturers industry, it is ranked #53.

To see additional POWR Ratings for NIO’s Growth and Momentum, click here.

AMC Entertainment Holdings, Inc. (AMC)

AMC operates as a theatrical exhibition company worldwide. It licenses first-run films from distributors owned by film production companies and independent distributors on a film-by-film and theatre-by-theater basis. It also offers food and beverages.

On July 19, 2021, AMC reached an agreement with Caruso, a privately owned, industry-renowned real estate company, to add two Los Angeles area locations under a long-term lease. As they have reopened theaters in August, AMC expects to witness rising foot traffic in the upcoming months.

AMC’s operating loss for its fiscal second quarter, ended June 30, 2021, declined 37.1% year-over-year to $296.60 million. Its adjusted net loss came in at $343.60 million, down 39.5% from the prior-year period. Its adjusted loss per share decreased 86.9% year-over-year to $0.71.

AMC’s EPS is expected to remain negative in the upcoming quarters of the current year and next year. The EPS is expected to decline at a rate of 217% per annum over the next five years.

In terms of forward EV/Sales, AMC is currently trading at 11.68x, 349.3% higher than the 2.60x industry average. AMC has a 7.60x forward Price/Sales, 327.3% higher than the industry average of 1.78x.

The stock has lost 29.2% over the past three months and closed yesterday’s trading session at $36.77. 

AMC’s POWR Ratings are consistent with this bleak outlook. The stock has an overall rating of D, which translates to Sell. In addition, AMC has an F grade for Value and Stability, and a D grade for Sentiment and Quality.

Moreover, it is ranked #7 of 9 stocks in the F-rated Entertainment - Movies/Studios industry.

In addition to the POWR Rating grades I’ve highlighted, one can see AMC’s ratings for Growth and Momentum here.

Virgin Galactic Holdings, Inc. (SPCE)

SPCE is an aerospace company that focuses on the development, manufacture, and operations of spaceships and related technologies to conduct commercial human spaceflight, fly commercial research, and develop payloads into space. It also offers ground and flight testing and post-flight maintenance of spaceflight vehicles.

In an announcement dated September 29, 2021, SPCE has cleared to fly FAA-licensed spaceflights following the conclusion of an FAA inquiry that focused on air traffic control clearance and real-time mission notification related to the Unity 22 flight in July. SPCE has updated calculations to expand the protected airspace for future flights. This will strengthen SPCE’s preparations for the commercial launch of the spaceflight experience.

For its fiscal second quarter ended June 30, 2021, SPCE’s operating loss increased 17.2% year-over-year to $73.90 million. The company’s net loss came in at $94.04 million, up 30.7% from the prior-year period. Its loss per share increased 14.7% from the year-ago period.

Analysts expect the stock’s EPS to remain negative in the upcoming quarters of the current year and next year. SPCE’s EPS is expected to decline at a rate of 60.6% per annum over the next five years.

Over the past three months, SPCE has declined 49.4% and closed yesterday’s trading session at $22.73. SPCE’s 474.72x forward EV/Sales is significantly higher than the 1.91x industry average. In terms of forward Price/Sales, SPCE is currently trading at 2757.26x is extremely higher than the industry average of 1.54x.

It’s no surprise that SPCE has an overall F rating, which translates to Strong Sell in our POWR Ratings system. In addition, the stock has an F grade for Value, Sentiment, Quality and Stability, and a D grade for Growth. Of the 31 stocks in the F-rated Airlines industry, SPCE is ranked #31.

Click here to see additional POWR Ratings for SPCE’s Momentum.

ContextLogic Inc. (WISH)

WISH operates as a mobile e-commerce company internationally. The company operates a Wish platform that connects users to merchants. It also provides marketplace and logistics services to merchants.

On October 4, 2021, WISH partnered with the state-owned Spanish carrier, Correos, to help Spanish merchants process their orders quickly and efficiently within a fully trackable system by giving WISH’s merchant dashboard access. WISH expects to optimize the customer experience and benefit from them in the upcoming months.

For its fiscal second quarter ended June 30, 2021, WISH’s non-GAAP revenue decreased 6.4% year-over-year to $656 million. The company’s non-GAAP gross profit came in at $389 million for the quarter, down 21.1% from the prior-year period. Its non-GAAP loss from operations came in at $71 million for the quarter, compared to a $12 million income from operations in the year-ago period. Its net income came in at $68 million versus a $17 million loss per share in the prior-year period.

The stock’s EPS is expected to remain negative in the upcoming quarters of the current year and next year. Analysts expect WISH’s revenue to decline 11.5% year-over-year to $2.25 billion.

The stock has lost 58.4% over the past three months and closed yesterday’s trading session at $4.85. WISH’s 1.34x forward Price/Sales is 12.2% higher than the 1.20x industry average. In terms of forward Price/Book, WISH is currently trading at 4.09x, 20.3% higher than the industry average of 3.40x.

WISH’s POWR Ratings reflect this bleak outlook. The stock has a D grade for Stability and Sentiment. Click here to see the additional ratings for WISH’s Value, Momentum, Growth, and Quality.

WISH is ranked #50 of 77 stocks in the F-rated Internet industry.

Sundial Growers Inc. (SNDL)

SNDL produces and markets cannabis products for the medical and adult-use market in Canada. It produces and distributes inhalable products, such as flowers, pre-rolls, and vapes. Its cannabis products are used as prescription medicines and to enhance social, spiritual, and recreational occasions.

On September 16, 2021, SNDL launched Caviar Cones, its newest product innovation, under the award-winning Top Leaf brand. This launch reinforces SNDL’s focused innovation pipeline around premium inhalable in the Canadian cannabis market.

For its fiscal second quarter ended June 30, 2021, SNDL’s gross loss increased 81.4% year-over-year to $2.82 million. The company’s loss from operations came in at $71.02 million, up 135% from the year-ago period. SNDL’s net loss came in at $52.29 million, down 13.4% from the prior-year period. Its loss per share decreased 94.7% year-over-year to $0.03.

SNDL’s EPS is expected to remain negative in the upcoming quarters of the current year and next year. Its revenue is expected to decline 11.7% year-over-year to $44.57 million in the current year.

Over the past three months, SNDL has lost 30% and closed yesterday’s trading session at $0.63. SNDL’s 12.95x forward EV/Sales is 90.5% higher than the 6.80x industry average. In terms of forward Price/Sales, SNDL is currently trading at 28.72x, which is 284.8% higher than the industry average of 7.46x.

SNDL’s weak prospects are reflected in its POWR Ratings. The stock has an overall rating of F, equating 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.

SNDL has an F grade for Value and Stability, and a D grade for Sentiment, Quality, and Momentum. In the 212-stock, F-rated Medical - Pharmaceuticals industry, it is ranked #206.

NIO shares rose $0.07 (+0.21%) in after-hours trading Tuesday. Year-to-date, NIO has declined -30.51%, versus a 16.97% rise in the benchmark S&P 500 index during the same period.

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.

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