3 Stocks Downgraded to "Strong Sell" This Week

While a slight decline in U.S. inflation in July, a robust job market, better-than-expected corporate earnings, and the passage of the Inflation Reduction Act helped revive investors’ confidence, concerns over a potential recession, as indicated by the deepening of the yield curve inversion, and weak economic data from some of the influential nations are expected to keep the market under pressure.

Speculations about what Fed Chairman Jerome Powell will signal at the Jackson Hole symposium on Friday have primarily contributed to the yield curve inversion. Moreover, soaring inflation in the UK, weak economic data in China, and rising global food prices and commodity shortages could make investors bearish. Therefore, fundamentally weak stocks could witness a significant decline.

Amid this backdrop, our proprietary POWR Ratings system has recently downgraded Zymeworks Inc. (ZYME), Volcon, Inc. (VLCN), and Lucid Diagnostics Inc. (LUCD) to Strong Sell because of their weak fundamentals and growth prospects.

Zymeworks Inc. (ZYME)

Headquartered in Vancouver, Canada, ZYME is a clinical-stage biopharmaceutical company that discovers, develops, and commercializes biotherapeutics for cancer treatment. The company operates through several platforms, including Azymetric, ZymeLink, EFECT, and ProTECT.

For its fiscal 2022 second quarter ended June 30, 2022, ZYME’s loss from operations came in at $65.82 million, indicating a 4.5% year-over-year decline. The company’s net loss came in at $64.62 million, representing a 4.3% decline from the prior-year period.

Its adjusted loss per share came in at $0.92, down 13.2% from the year-ago period. As of June 30, 2022, the company had $198.65 million in cash and cash equivalents, down 1.6% from the end of fiscal 2021.

ZYME’s EPS is expected to remain negative in fiscal 2022 ending December 31, 2022. The consensus revenue estimate of $18.46 million for the same fiscal year represents a 30.8% year-over-year decline. Over the past six months, ZYME has lost 9.5% to close the last trading session at $6.40.

ZYME’s POWR Ratings reflect this bleak outlook. On August 19, 2022, the stock was downgraded from an overall D rating to an F rating, equating to a Strong Sell in our proprietary rating system. The POWR Ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.

It has an F for Stability and Sentiment and a D for Quality, Value, and Momentum. Click here to see the additional ratings for ZYME’s Growth.

ZYME is ranked #374 of 399 stocks in the F-rated Biotech industry.

Volcon, Inc. (VLCN)

VLCN is an all-electric, off-road power sports vehicle company that develops and builds electric two- and four-wheel motorcycles and utility terrain vehicles (UTVs), along with a complete line of upgrades and accessories. It exports vehicles and accessories in Latin America, Canada, Europe, and Australia.

On August 19, 2022, VLCN received over $100 million of pre-production orders for its first all-wheel drive, fully electric UTV, the Stag, powered by multinational automotive manufacturer The General Motors Company’s (GM) electric propulsion system technology. Pre-production would result in more than $100 million worth of revenue following delivery if finalized.

The company plans to move into full production by the second quarter of 2023 and turn additional attention and resources towards increasing its component supply and manufacturing output.

For its fiscal 2022 second quarter ended June 30, 2022, VLCN’s loss from operations increased 140.6% year-over-year to $9.92 million. The company’s net loss came in at $9.93 million for the quarter, representing a 140% rise from the prior-year period.

Its loss per share came in at $0.41, down 79.5% from the year-ago period. As of June 30, 2022, the company had $4.72 million in cash, down 15.3% from the end of fiscal 2021.

VLCN’s EPS is expected to remain negative in fiscal 2022 ending December 31, 2022. Over the past six months, the stock has lost 10.9% to close the last trading session at $1.97.

VLCN’s weak prospects are reflected in its POWR Ratings. On August 19, 2022, the stock was downgraded from an overall D rating to an F rating.

It has an F grade for Value, Stability, and Quality and a D for Growth. Click here to see the additional ratings for VLCN’s Momentum and Sentiment.

VLCN is ranked #54 of 66 stocks in the D-rated Auto & Vehicle Manufacturers industry.

Lucid Diagnostics Inc. (LUCD)

LUCD, a subsidiary of medical device company PAVmed Inc. (PAVM), operates as a commercial-stage medical diagnostics technology company that focuses on patients with gastroesophageal reflux disease who are at risk of developing esophageal precancer and cancer.

On August 11, 2022, LUCD’s LucidDx Labs Inc. subsidiary announced the launch of four new Lucid Test Centers in Orange County, Dallas-Fort Worth, Palm Beach County, and Columbus. This will enable at-risk GERD patients to access LUCD’s EsoGuard DNA Esophageal Test to detect esophageal pre-cancer on samples collected using its EsoCheck Cell Collection Device.

LUCD’s loss from operations for its fiscal 2022 second quarter ended June 30, 2022, increased 143.1% year-over-year to $14.62 million. While its net loss increased 137.3% year-over-year to $14.62 million, its loss per share grew 6.8% to $0.41. As of June 30, 2022, the company had $32.68 million in cash, down 39.1% from the end of fiscal 2021.

The consensus EPS estimate is negative for fiscal 2022 ending December 31, 2022. It missed Street EPS estimates in each of the trailing four quarters. Over the past six months, the stock has lost 34% to close the last trading session at $2.37.

LUCD’s weak fundamentals are reflected in its POWR Ratings. On August 19, 2022, the stock was downgraded from an overall D rating to an F rating.

LUCD has an F grade for Value and Quality and a D for Growth and Momentum. Click here to see additional ratings for LUCD’s Stability and Sentiment.

LUCD is ranked #141 of 144 stocks in the D-rated Medical - Devices & Equipment industry.

VLCN shares were trading at $2.25 per share on Tuesday afternoon, up $0.28 (+14.21%). Year-to-date, VLCN has declined -79.17%, versus a -12.49% rise in the benchmark S&P 500 index during the same period.

Sweta is an investment analyst and journalist with a special interest in finding market inefficiencies. She’s passionate about educating investors, so that they may find success in the stock market.

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