This vicious bear market has spared very few firms in 2022. The S&P 500 has slipped more than 23% so far and it increasingly feels that things are getting worse. The Fed continues to reiterate that it foresees aggressive rate hikes ahead until inflation is brought under control.
Thus, this sort of environment very likely spells trouble ahead. Markets likely have further to fall. But some stocks will fall farther than others. Rising interest rates affect different sectors in different ways. Thus, these effects tend to be very obvious and largely-predictable for sectors like housing. Tech, too, will likely continue to tumble.
Investors who take the view that the 2022 market is the opposite of the pandemic market have the right mindset. If it was hot in 2021, there’s a good chance it’s gone cold in 2022.
| OPEN | Opendoor Technologies | $2.71 |
| RDFN | Redfin | $4.41 |
| TDOC | Teladoc | $24.57 |
| CLOV | Clover Health | $1.61 |
| PTON | Peloton | $8.71 |
| CVNA | Carvana | $18.87 |
| ZM | Zoom Video | $74.73 |
Opendoor Technologies (OPEN)
Opendoor Technologies (NASDAQ:OPEN) stock briefly came back to life following its earnings report released Aug. 4. It’s easy to see why there was room for the brief enthusiasm. Sales increased to $4.2 billion, up 254% as the iBuyer sold 10,482 homes in the period.
Gross profits jumped 201%, reaching $486 million. And the company’s net loss narrowed to $54 million from $144 million a year earlier.
But the rally was short-lived and any gains were given back beginning a week later.
Simply put, Opendoor is a company that carries significant risk. Opendoor noted that the slowdown in home price appreciation following interest rate hikes was greater than the company anticipated. It made that fact known at a time when 30-year fixed mortgages were at 5.3%. They now stand around 6.6%. That means Opendoor is likely scrambling behind the scenes as troubles cascade.
OPEN stock might be tempting due to its low price and significant upside based on its consensus target price. But the bottom could fall out anytime in this bear market.
Redfin (RDFN)
In this bear market, it’s difficult to find a reasonable narrative for Redfin (NASDAQ:RDFN) stock right now. The residential real estate brokerage has seen its shares decline from $39 to $5 in 2022. Rising mortgage rates are eroding purchasing power and Redfin’s supply of homebuyers is drying up.
Redfin chief economist Taylor Marr reports that home prices are remaining steady but with mortgage rates rising buyers are fleeing. 33% fewer people are searching for homes for sale based on internet traffic data.
The mortgage on a median-asking-price home ($383k) increased to $2,528 from $1,701 a year earlier as rates increased from 2.99% to 6.6%. A buyer today who purchases a $383k home with no money down and a 6.6% 30-year fixed mortgage will pay $497k in interest. That same buyer would have paid $197k in interest over the lifetime of the mortgage a year ago.
Homebuyers are facing difficult conditions and with the Fed vowing to continue to raise rates, Redfin will too.
Teladoc (TDOC)
Teladoc (NYSE:TDOC) stock went parabolic during the pandemic. The telehealth firm was in the perfect position to advance its platform as in-person health consultations suddenly became dangerous, and teleconsultations took off. The pandemic was a chance for telemedicine to advance several years in far less time.
Teladoc did, to a degree. By the middle of 2021, the company was reporting $503.14 million in revenue. Its net loss was a reasonable $133.82 million in that quarter. Not great, but Teladoc was losing a little more than $1.30 for every $5 it made.
Fast forward a year and things are much worse. Revenues increased 18% to $592.38 million. Thus, growth is still evident. However, Teladoc’s net loss for Q2 was a whopping $3.101 billion. That means its losses have increased by a factor of 23.3X.
TDOC stock has seen its value decline by more than 5% on multiple days in 2022. It’s a truly volatile share and can lose investors’ money quickly in this bear market.
Clover Health (CLOV)
Clover Health (NASDAQ:CLOV) stock looks like a going concern as Chamath Palihapitiya steps further away from the SPAC-funded medicare firm. Palihapitiya now owns less than 5% of Clover Health after recently cutting his stake.
He’s been a controversial founder overall and there’s little to suggest that his continued participation matters anyway. The company has never been profitable. Through the first half of 2022, Clover Health posted operating and net losses of $189.84 million and $179.49 million, respectively.
Clover Health is predicting that 2023 will mark a turnaround for the firm. The idea is that the company will benefit from greater predictability as lingering pandemic effects have made healthcare costs less predictable. That’s a reasonable argument.
However, the fact is that CLOV stock is headed toward $0 quickly, and more predictable business hardly ensures that Clover Health will be any closer to breaking even next year. Simply put, CLOV stock might not trade on the Nasdaq by then and could be trading over the counter, especially if this bear market picks up steam.
Peloton (PTON)
Peloton (NASDAQ:PTON) CEO Barry McCarthy openly described the bearish narrative against his firm in his Aug. 25 shareholder letter. “The naysayers will look at our Q4 financial performance and see a melting pot of declining revenue, negative gross margin, and deeper operating losses. They will say these threaten the viability of the business.”
Go with that take. Over the last three quarters, results have been disappointing. Revenues increased from $936.9 million to $964.3 million through the first quarter of 2022. Then they declined to $678.7 million in the most recent quarter.
Meanwhile, net losses in those quarters went from $313 million to $757 million to $1.244 billion. The firm recorded $1.172 billion in operating expenses. That’s unsustainable, even though Peloton has access to a $500 million line of credit.
Peloton simply cannot replace the opportunity to exercise outside or in the gym. It had a moment during lockdowns but that’s all it was. We’re now in a bear market that looks unstoppable, and PTON stock could be the latest victim to get mauled by the bear.
Carvana (CVNA)
Carvana’s (NYSE:CVNA) stock is dangerous. The company’s share price has dropped from $360 in August of last year, to below $20 today. The used car bubble has burst.
That means that Carvana should logically have trouble moving forward. Used car prices have fallen for many months as interest rates continue to move higher. Carvana purchased many of the vehicles it needs to sell at higher prices when the used car market was hot. The company assumed it would be able to sell those used vehicles at higher prices. That is less and less the case, as Carvana now confronts a double whammy.
Prices are falling, meaning the gap between what it paid and how much it can sell a vehicle for is narrowing. And rising interest rates mean higher overall payments, pushing overall demand lower.
Carvana reported a net gain of $22 million in Q2 ‘21. That has morphed into a net loss of $238 million a year later as market dynamics have changed completely.
Zoom Video (ZM)
Zoom Video (NASDAQ:ZM) stock has gone from above $180 this year to below $80 currently.
Demand is stagnating and that is resulting in weakening fundamentals for the tech firm. Zoom’s latest earnings show that revenue is relatively flat, increasing a modest 7.65% in the quarter.
Zoom’s pandemic-driven growth has decreased significantly as working and learning from home has cooled. There are a number of factors that have contributed to this phenomenon. However, the overall numbers are more impressive. Zoom posted three straight quarters of year-over-year quarterly growth above 360% during the pandemic. Thus, the 8% growth figure the company was able to muster in the most recent quarter is a tough pill to swallow.
Zoom is looking to target larger enterprise partners, as smaller firms haven’t provided growth of late. Zoom will face competitors including Microsoft (NASDAQ:MSFT) and its Teams offering.
In short, the shine has worn off of Zoom and it is facing a much tougher environment than it was just a year earlier.
On the date of publication, Alex Sirois 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.