- AMC Entertainment Holdings, Inc. (NYSE:AMC): Disappointing ticket sales are still 42% below where they were in 2019.
- Moderna, Inc. (NASDAQ:MRNA): Large and prominent customers have declined to exercise options for additional Spikevax doses.
- Transocean Ltd. (NYSE:RIG): Despite rising crude prices, customers are refraining from making multiyear drilling commitments.
Rising inflation, high energy prices and geopolitical turmoil have become this year’s dominating themes. Investors are particularly concerned about the impact of a hawkish Federal Reserve determined to hike interest rates at each of its remaining six Federal Open Market Committee meetings in 2022. As a result, the Nasdaq 100 index has lost more than 15% year-to-date (YTD).
What a difference a year has made. In 2021, many so-called ‘hot stocks’ capitalized on the pandemic-induced liquidity push by the Fed. However, recently the discourse has now changed turmoil, which analysts are debating if a recession is possible in 2023.
These question marks have led to a market correction at the beginning of the year. Yet, a number of those hot stocks still seem overpriced based, on their fair value estimates and fundamentals. The VanEck Social Sentiment ETF (NYSEARCA:BUZZ), heavily dominated by these hot stocks, has lost 25% of its value year to date. And we do not seem to have price stability, yet.
With that information, here are three hot stocks that could see further declines in the coming months:
| AMC | AMC Entertainment Holdings, Inc. | $18.02 |
| MRNA | Moderna, Inc. | $165.49 |
| RIG | Transocean Ltd. | $4.58 |
Hot Stocks: AMC Entertainment Holdings, Inc. (AMC)
Our first hot stock, AMC Entertainment (NYSE:AMC), is a global player in the theatrical exhibition business. The company operates roughly 1,000 theatres and 11,000 screens in 15 countries.
However, the pandemic disrupted operations significantly. Then, 2021 saw the army of Reddit traders who were happy to bet on brighter days for the entertainment group.
AMC released fourth-quarter results on March 1. Revenue grew to $1.17 billion, up from $162.5 million in the prior-year quarter. Net loss narrowed to $134 million, down from $946 million a year ago. Cash and equivalents ended the period at $1.59 billion.
After a brief surge in ticket sales late last year, ticket sales still remain 42% below where they were in 2019. This metric is ominous for a company sitting on more than $5.4 billion in debt.
Meanwhile, management recently announced the purchase of a 22% stake in an upstart gold mining company with a shaky financial history, puzzling investors by investing in an entirely unrelated field.
AMC stock is down 30% YTD despite gaining 35% over the past month. Shares are trading at 3.4 times trailing sales.
Meanwhile, the 12-month median price forecast for AMC stock stands at $6. The meme-stock is not suitable for all portfolios.
Moderna, Inc. (MRNA)
Our second hot stock is the biotech name Moderna. It specializes in developing messenger RNA therapeutics and vaccines. Yet, Moderna’s only source of recurring revenue is the Spikevax jab, a fully approved Covid-19 vaccine. Understandably, Moderna has been one of the hottest names during the pandemic.
The biotech reported Q4 results on Feb. 24. Revenue soared to $7.2 billion, up from $571 million for the prior-year period. Net income came in at $4.9 billion, or $11.29 per diluted share, compared to a net loss of $272 million a year ago. Cash, equivalents, and investments ended the year at $17.6 billion.
In early April, the World Health Organization’s (WHO) COVAX vaccine initiative declined the purchase of 166 million doses. The 55-country African Union also turned down a 60 million-dose delivery. This development has dampened investor appetite for the company.
MRNA stock is down 38% YTD. However, analysts debate whether MRNA shares still seem overpriced for a company with a singular revenue-generating therapy.
Shares trade at 6.2 times forward earnings and 4x trailing sales. But if we see a further decline in sales number, these fundamental metrics could change fast. At present, the 12-month median price forecast for Moderna stock is at $210.
Hot Stocks: Transocean Ltd. (RIG)
Our final hot stock is Transocean, the prominent provider of contract offshore services for oil and gas wells. It specializes in challenging segments of the offshore drilling business, focusing on deepwater and harsh environment drilling services.
Transocean released Q4 results on Feb. 22. Contract drilling revenue declined 10% year-over-year to $621 million. Adjusted net loss came in at $126 million, or 19 cents loss per diluted share, compared to $122 million in the third quarter. Cash and equivalents ended the period at $1.4 billion.
Even with higher crude prices, total fleet utilization remained disappointingly low at 53%. It seems like customers are refraining from making new multi-year commitments.
As of Feb. 14, the company’s total backlog was roughly $6.5 billion. However, the company also held $6.7 billion in long-term debt at the end of December.
RIG stock is currently up almost 40% YTD. Shares are trading at 1.1x trailing sales. Finally, the 12-month median price forecast for Transocean stock stands at $4.50. We could see profit taking in RIG shares in the current quarter.
On the date of publication, Tezcan Gecgil 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.
