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2 Beaten-Down Nasdaq Stocks to Avoid Until Further Notice

The NASDAQ Composite has been facing significant turmoil due to successive rate hikes. As recessionary fears loom over the economy, beaten-down stocks DraftKings (DKNG) and Affirm Holdings (AFRM) might be best avoided until further notice. Read more…

Historically, September has been a tough month for the stock market, and this year proved to be no exception. With the tech-heavy NASDAQ Composite down 10.4% in the past month, the road ahead looks grim. On top of it, the major U.S. equity benchmarks were down between 8% and 11% in September. 

The Fed’s successive rate hikes weigh particularly on the technology sector. This sector has been on a downtrend lately as investors head to more defensive assets to deal with higher interest rates to get ahead of a possible recession. 

Moreover, as the largest economies - the United States, China, and the euro area - have been slowing sharply, the World Bank has stated that the world may be edging toward a global recession. World Bank President David Malpass, said, "Global growth is slowing sharply, with further slowing likely as more countries fall into recession."

Amid this backdrop, it might be best to avoid weak NASDAQ stocks DraftKings Inc. (DKNG) and Affirm Holdings, Inc. (AFRM). These stocks have been hit hard this year and might continue their downward trend.  

DraftKings Inc. (DKNG)  

DKNG is a digital sports entertainment and gaming company that offers multi-channel sports betting and gaming technologies. The company operates through two segments: Business-to-Consumer and Business-to-Business.  

For the fiscal second quarter that ended June 30, 2022, DKNG’s operating expenses increased 7% year-over-year to $462.34 million. Its adjusted EBITDA declined 24% year-over-year to a negative $118.13 million. Also, its net loss and loss per share came in at $217.10 million and $0.50, respectively. 

Analysts expect DKNG’s loss per share for fiscal 2022 ending December to come in at $3.19. Moreover, the company has missed the consensus EPS estimates in three of the trailing four quarters. 

DKNG has slumped 66.1% over the past year to close the last trading session at $16.70. The stock has fallen 39.2% year-to-date.  

DKNG’s POWR Ratings are consistent with this bleak outlook. The stock has an overall F rating, equating to a Strong Sell in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting. 

It has an F grade for Stability and Quality and a D for Value. DKNG is ranked #26 in the D-rated 27-stock Entertainment – Casinos/Gambling industry.  

Click here to see the additional POWR Ratings for Growth, Momentum, and Sentiment for DKNG. 

Affirm Holdings, Inc. (AFRM)  

AFRM operates a platform for digital and mobile-first commerce in the United States, Canada, and internationally. The company’s platform includes point-of-sale payment solutions for consumers, merchant commerce solutions, and a consumer-focused app. 

In September, AFRM and, Inc. (AMZN) announced their relationship’s expansion to increase payment flexibility for Canadian customers. However, the gains from this relationship might be stretched over a long period.

AFRM’s total operating expenses increased 70.6% year-over-year to $641.36 million for the fourth quarter that ended June 30, 2022. Its operating loss increased 142.6% from the year-ago value to $277.23 million. Its net loss rose 51% from its prior-year quarter to $186.39 million. The company’s loss per share amounted to $0.65. 

AFRM’s EPS is expected to decline 27.4% year-over-year to a negative $3.20 in the fiscal year ending June 2023.

AFRM has lost 81.2% over the past year to close the last trading session at $20.92. The stock has dropped 52.3% year-to-date.  

AFRM’s POWR Ratings reflect its poor prospects. The stock has an overall F rating, equating to a Strong Sell in our POWR Rating system.   

The stock has an F grade for Stability and a D for Value, Sentiment, and Quality. It is ranked #77 out of 79 stocks in the D-rated Technology – Services industry. 

To access the AFRM ratings for Growth and Momentum, click here.

DKNG shares were trading at $16.06 per share on Thursday afternoon, down $0.64 (-3.83%). Year-to-date, DKNG has declined -41.54%, versus a -20.10% rise in the benchmark S&P 500 index during the same period.

About the Author: Kritika Sarmah

Her interest in risky instruments and passion for writing made Kritika an analyst and financial journalist. She earned her bachelor's degree in commerce and is currently pursuing the CFA program. With her fundamental approach, she aims to help investors identify untapped investment opportunities.


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