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Generally, I dislike writing about the worst stocks to buy now (or similar themes) because it invariably offends members of the internet defense league. It’s not the greatest experience to receive a flood of messages from people defending the honor of corporations who could care less about them. However, in this case, I’m game.
Recently, my colleagues have turned to ChatGPT to ask the artificial intelligence program what it thinks are the best or worst stocks to buy now. I did something similar but with the investment resource Gurufocus.com. Interestingly, the platform features a filter called “Probability of Financial Distress (%).” And so, I inputted the worst range possible – 95% to 100% probability of distress.
For full disclosure, I used no other filter aside from not including the following equities categories: over-the-counter securities, trusts, and master limited partnerships (MLPs). What you see before you are the seven worst stocks to buy now. Please don’t shoot the messenger.
First Republic Bank
Faraday Future Intelligent Electric
First Republic Bank (FRC)
Leading off this list of worst stocks to buy now, First Republic Bank (NYSE:FRC) should really catch no one by surprise. The only exception is if you haven’t heard about the latest banking fiasco. Otherwise, you know that several market observers have raised red flags about FRC. Though it had a big move up on Thursday, over the trailing five sessions through the close of March 16, FRC fell a staggering 50.4%.
Just that statistic alone warrants inclusion for the worst stocks to buy now. Still, without context, FRC might appear as a sterling contrarian buy. For instance, the market prices shares at a trailing multiple of 4.16. It also prices them at a forward multiple of 5.72. No matter which way you look, First Republic appears undervalued. However, Gurufocus.com warns that it’s a possible value trap. Presently, one of the major concerns about the enterprise centers on its balance sheet. It features a cash-to-debt ratio of 0.28 times, ranked worse than nearly 83% of the competition. Frankly, you should probably avoid this stock.
Archer Aviation (ACHR)
Coming in second place on this dubious list of worst stocks to buy now is Archer Aviation (NYSE:ACHR). An American firm commercializing electric vertical takeoff and landing (eVTOL) aircraft, Archer appears compelling from a narrative point of view. Unfortunately, at some point, investors do want to see narratives turn into a credible pathway toward profitability.
Unfortunately, it’s not quite taking off. Sure, since the Jan. opener, ACHR gained over 38% of its equity value. However, in the past 365 days, the security fell by almost 37%. Since making its public market debut (via a reverse merger with a blank-check firm), ACHR collapsed by 73%. Interestingly, Archer benefits from a decently stable balance sheet. Right now, its cash-to-debt ratio stands at 23.93 times, above 85.56% of its peers. However, it’s the profitability that kills the company for many prospective speculators. In a pre-revenue enterprise, the firm consistently loses money. With risk-on sentiment fading in the market, ACHR ranks among the worst stocks to buy now.
Nuvation Bio (NUVB)
Headquartered in San Francisco, California, Nuvation Bio (NYSE:NUVB) enjoyed a rare positive performance on March 16, gaining over 2%. That’s about as good as it gets for the oncology specialist, which focuses on difficult-to-treat cancers. Since the start of the new year, NUVB gave up nearly 17% of its equity value. In the past 365 days, it’s down over 68%. Initially, Nuvation doesn’t appear to rank among the worst stocks to buy now. In particular, it features a very robust balance sheet. Presently, its cash-to-debt ratio stands at 155.17 times, above 77% of the industry. Also, its equity-to-asset ratio is 0.98 times, ranking better than nearly 98% of the competition.
However, Nuvation represents a purely aspirational firm, meaning that it generates zero revenue. At a time when investors are moving away from risk-on assets, NUVB appears particularly risky. To be fair, analysts peg NUVB as a consensus moderate buy with a $4.33 price target. While that implies a 158% upside potential, this could be a case of unjustified euphoria. I’ll let you be the judge.
Faraday Future (FFIE)
A struggling electric vehicle firm, Faraday Future (NASDAQ:FFIE) should be an unsurprising inclusion for worst stocks to buy now. With the consumer economy suffering from myriad pressures, now’s not the time to acquire big-ticket items. Moreover, the company’s FF 91 may feature a starting price of $180,000. That might be the killer right there. Faraday has no business charging that much without establishing a viable brand.
It seems the market picked up on this framework. While FFIE gained a stunning 57% in the year so far, in the trailing one-year period, it’s down 91%. Looking at its financials, the situation becomes even more problematic. Without revenue, the company stares at staggering losses. Therefore, it features truly ugly stats for return on equity (ROE) and returns on asset (ROA). To be fair, Faraday does feature a middling balance sheet, if that’s even a good thing. However, no analyst covers it. And with a share price of 42 cents, it’s looking at a de-listing.
Mullen Automotive (MULN)
The name that brings fear to anyone covering the market, Mullen Automotive (NASDAQ:MULN) comes in as the fifth name of worst stocks to buy now. Again, I’m just reading off the list that Gurufocus.com provided as is. However, if we’re being objective, MULN ranking poorly shouldn’t be a shocker. Sure, Mullen made significant progress. Nevertheless, it’s going to take a herculean effort to convince customers to bet big on a no-name vehicle.
Aside from the customer market concern, Mullen runs into a similar problem plaguing other worst stocks to buy now: no revenue. While investors were willing to extend lifelines to such enterprises during a low-interest rate environment, I’m not sure how they’ll feel in a rising interest rate environment. Plus, with banking sector fears clouding the broader ecosystem, MULN appears unnecessarily risky. Plus, it’s getting absolutely destroyed in the charts. Since the Jan. opener, MULN cratered over 53%. In the trailing year, it’s down 94%. It may be time for investors to recognize the obvious dangers and run.
Prelude Therapeutics (PRLD)
Based in Wilmington, Delaware, Prelude Therapeutics (NASDAQ:PRLD) represents a clinical-stage biopharmaceutical company. Specifically, it designs and develops a pipeline of novel, small-molecule therapies that precisely target the key drivers of cancer cell growth and resistance. Although scientifically compelling, PRLD faces credibility issues. In the trailing one-year period, shares tumbled almost 22%.
In fairness, some metrics suggest that PRLD doesn’t deserve to be listed among the worst stocks to buy now. Again, let me just emphasize that I’m merely reporting what Gurufocus.com spat out. Further, I agree that Prelude benefits from a strong balance sheet. In particular, its cash-to-debt ratio comes in at 110.11 times, above 77.68% of the industry.
So, where does the biotech outfit go wrong? Unfortunately, Prelude represents another pre-revenue enterprise. As macroeconomic fears weigh on investor sentiment, market participants will likely lose patience for such entities. Also, key stats such as ROE and ROA have fallen into negative territory.
GeneDx Holdings (WGS)
Based in Stamford, Connecticut, GeneDx Holdings (NASDAQ:WGS) is a whole genome and exome testing specialist. Through its products, GeneDx facilitates a complete view of a patient’s genetic makeup. Although offering a fascinating scientific profile, WGS simply failed to capture investors’ interest. Sure, it gained almost 27% since the January opener. However, in the trailing year, WGS hemorrhaged almost 89% of its market value.
Look, the reality is that anytime a public security crumbles 89%, you’re probably going to end up as one of the worst stocks to buy now. Therefore, I can’t fault Gurufocus.com for ranking it so high (or is that so low?). Financially as well, circumstances don’t get much better for GeneDx. Operationally, the company suffers from a three-year revenue growth rate of 5.2% below parity. As well, its free cash flow growth rate during the same period sits at 90.8% below breakeven. Not surprisingly, GeneDx carries deeply negative operating and net margins. While it does have some strengths in the balance sheet, overall, it’s middling. Therefore, WGS represents one of the worst stocks to buy now.
On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare.
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