The tech industry has been under pressure due to the Fed’s rate hikes to tame inflation, recession concerns, and layoffs. Therefore, we think IonQ, Inc. (IONQ), Fathom Digital Manufacturing Corporation (FATH), and Rigetti Computing, Inc. (RGTI), which have been slumping in price, might be best avoided now.
The International Monetary Fund (IMF) forecasts a slowing of global growth. This might damage the tech industry's near-term prospects. Global IT spending has been weakening amid this scenario.
Stephen Minton, vice president in IDC’s Data and Analytics research group, said, “Since the fourth quarter of last year, we have seen clear and measurable signs of a moderate pullback in some areas of IT spending.”
Also, due to a slowing global economy and weak revenue growth, technology companies have increased the rate of layoffs in 2023. According to Crunchbase News, about 136,569 workers in U.S.-based IT companies (or tech companies with a big U.S. workforce) have been laid off in mass layoffs.
Let’s discuss the stocks mentioned above.
IonQ, Inc. (IONQ)
IONQ engages in the development of general-purpose quantum computing systems in the United States.
IONQ’s ROTA of negative 8.11% is lower than the industry average of 0.52%. Also, its ROCE of negative 8.37% is lower than the industry average of 1.40%.
Its forward Price/Sales of 57.36x is significantly higher than the industry average of 2.47x, while its forward EV/Sales multiple of 64.29 is significantly higher than the industry average of 2.66.
IONQ’s total operating costs and expenses increased 119.7% year-over-year to $27.43 million for the fourth quarter that ended December 31, 2022. The company’s loss from operations increased 118% year-over-year to $23.63 million. Additionally, its adjusted EBITDA came in at $13.30 million, representing a 66.3% increase from the year-ago period.
IONQ’s EPS is expected to decrease 94% to a negative $0.49 in 2023. It has lost 32.4% over the past year to close the last trading session at $5.31. IONQ is trading near its 52-week low of $3.04, which it hit in December 2022.
IONQ’s bleak outlook is 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 assess stocks by 118 different factors, each with its own weighting.
It is also rated an F grade for Stability and Value and a D for Growth, Sentiment, Momentum, and Quality. In the Technology - Hardware industry, it is ranked last among the 41 stocks. Click here to see IONQ’s rating.
Fathom Digital Manufacturing Corporation (FATH)
FATH is a digital manufacturing platform provides product development and manufacturing services in North America.
FATH’s ROTA of negative 131.87% is lower than the industry average of 5.16%. Also, its ROCE of negative 207.67% is lower than the industry average of 13.94%.
Its forward EV/EBITDA of 12.73x is 22.5% higher than the industry average of 10.39x, while its forward EV/Sales multiple of 1.97 is 25.8% higher than the industry average of 1.57.
FATH’s revenue decreased 13.3% year-over-year to $38.40 million for the fourth quarter ended December 31, 2022. However, its net loss came in at $114.88 million, compared to a net income of $25.05 million in the year-ago period. Its adjusted EBITDA came in at $3.03 million, down 71.3% year-over-year.
Street expects FATH’s revenue is expected to fall 9.7% year-over-year to $145.47 million in 2023. Its EPS is expected to remain negative 0.16 in 2023. The stock has lost 93.1% over the past year to close the last trading session at $0.50. It reached its 52-week low of $0.41 on April 27, 2023.
FATH has an overall F rating, equating to a Strong Sell in our POWR Ratings system.
It has an F grade for Growth and Quality and a D for Value and Sentiment. It is ranked #41 in the same industry. We have also rated FATH for Stability and Momentum. Get all the FATH ratings here.
Rigetti Computing, Inc. (RGTI)
RGTI operates as an integrated systems company. The company builds quantum computers and the superconducting quantum processors that power them.
RGTI’s ROTC of negative 57.83% is lower than the industry average of 1.97%. Also, its ROCE of negative 181.77% is lower than the industry average of 1.40%.
Its trailing-12-months Price/Sales of 3.15x is 27.2% higher than the industry average of 2.48x.
For the fourth quarter that ended December 31, 2022, RGTI’s loss from operations increased 141.6% year-over-year to $26.73 million. The company’s net loss came in at $22.87 million, up 62.1% year-over-year. Its current liabilities came in at $21.75 million for the period that ended December 31, 2022, compared to $7.57 million for the period that ended December 31, 2021.
Analysts expect RGTI’s EPS is expected to fall 42.1% year-over-year to $0.27 in 2024. The stock has lost 94.3% over the past year to close the last trading session at $0.40. RGTI is trading near its 52-week low.
RGTI’s POWR Ratings are consistent with its weak fundamentals. The stock has an overall F rating, which equates to Strong Sell in our proprietary rating system. It also has an F grade for Stability and Sentiment and a D for Momentum and Quality. Within the same industry, it is ranked #39.
In addition to the POWR Rating grades we have stated above, you can see RGTI’s Value and Growth ratings here.
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IONQ shares were trading at $5.34 per share on Wednesday afternoon, up $0.03 (+0.56%). Year-to-date, IONQ has gained 54.78%, versus a 8.07% rise in the benchmark S&P 500 index during the same period.
About the Author: Rashmi Kumari
Rashmi is passionate about capital markets, wealth management, and financial regulatory issues, which led her to pursue a career as an investment analyst. With a master's degree in commerce, she aspires to make complex financial matters understandable for individual investors and help them make appropriate investment decisions.
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