Consumers continue to feel the pinch of high inflation and rising borrowing costs due to the Fed’s interest rate hikes. The recent turmoil in the banking system has added to their financial stress, reducing purchasing power and decreasing consumer spending.
In light of this, it could be wise to steer clear of consumer goods stocks PLBY Group, Inc. (PLBY), Vinco Ventures, Inc. (BBIG), and AquaBounty Technologies, Inc. (AQB) that are fundamentally weak and prone to economic volatility.
Before delving into the fundamentals of these stocks, let’s examine the current state of the economy in-depth.
Consumers continue to face various challenges due to the ongoing economic condition, such as increased prices, product unavailability, and delivery delays. Consumer spending, which constitutes over two-thirds of economic activity, grew by 0.2% in February, falling short of the 0.3% forecast by Reuters economists.
Additionally, the banking sector’s unrest has made it more difficult for consumers to acquire loans for significant purchases. As per a University of Michigan survey, consumer sentiment in March fell for the first time in four months, dropping 8% below February levels.
Carl Tannenbaum, a chief economist of Northern Trust (NTRS), said, “Because of uncertainty, a business might not go ahead with hiring or investment, or households may become more frugal, saving rather than spending.” He added, “The accumulation of those reactions can interrupt an economic expansion.”
Current economic conditions might not fare well for struggling consumer goods companies. Hence, avoiding fundamentally weak consumer goods stocks PLBY, BBIG, and AQB could be a wise decision.
PLBY Group, Inc. (PLBY)
PLBY is a global pleasure and leisure company that operates through three segments, Licensing; Direct-to-Consumer; and Digital Subscriptions and Content. Its offerings include sexual wellness, style and apparel, digital entertainment, lifestyle, beauty, and grooming products for men and women.
For the fourth quarter that ended December 31, 2022, PLBY’s net revenues decreased 28.4% year-over-year to $68.52 million. Its non-operating expenses increased 289% year-over-year to $7.43 million. Also, the company’s adjusted EBITDA loss stood at $5.99 million, compared to a profit of $14.69 million in the prior year’s quarter.
Furthermore, net loss attributable to PLBY and net loss per share came in at $10.24 million and $0.22, respectively.
Analysts expect the company to report a loss per share of $0.47 for the fiscal year (ending December 2023). The company’s revenue for the current year is expected to decrease by 11.3% from the prior year to $236.79 million. Also, PLBY failed to surpass the consensus revenue estimates in three of four trailing quarters, which is disappointing.
The stock has slumped 58.1% over the past six months and 86.5% over the past year to close the last trading session at $1.61.
PLBY’s weak fundamentals are reflected in its POWR Ratings. It has an overall F rating, translating to a Strong Sell in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, each weighted to an optimal degree.
The stock also has an F grade for Sentiment and a D for Value, Stability, and Quality. It is ranked #52 out of 80 stocks within the Consumer Goods industry.
Click here to see the other ratings of PLBY for Growth and Momentum.
Vinco Ventures, Inc. (BBIG)
BBIG develops and sells a range of consumer products, such as kitchenware, small appliances, toys, pet care, baby products, health and beauty aids, and housewares, to retailers, mass-market retailers, and e-commerce sites. The company also offers the Lomotif, Cortex, and Non-Fungible Token platforms alongside digital marketing services.
On February 17, Nasdaq issued a Staff Determination letter to BBIG stating that the company had not complied with Nasdaq's filing requirements for its Form 10-Q for the periods ended June 30, 2022, and September 30, 2022, as previously notified on August 19 and November 17, 2022.
Non-compliance with Nasdaq’s filing requirements could negatively affect the company's reputation and transparency. It might also lead to trading restrictions, stock price declines, fines, and legal actions.
For the quarter that ended September 30, 2022, BBIG’s cost of revenues increased significantly year-over-year to $6.80 million. Its gross deficit stood at $1.24 million, compared to a gross profit of $129.67 thousand in the prior year’s quarter. Also, the company’s operating loss widened 579.5% year-over-year to $173.12 million.
In addition, the company reported a net loss and loss per share of $167.74 million and $0.40, respectively. As of September 30, 2022, the company’s total assets stood at $117.21 million, compared to $405.14 million as of December 31, 2021.
The stock plummeted 40.7% over the past month and 74.8% over the past six months to close the last trading session at $0.25.
BBIG’s bleak outlook is reflected in its overall F rating, equating to a Strong Sell in our POWR Ratings system.
The stock also has an F grade for Value, Stability, and Quality and a D for Sentiment. It is ranked #56 within the Consumer Goods industry.
Click here to access BBIG’s rating for Growth and Momentum.
AquaBounty Technologies, Inc. (AQB)
AQB is a biotech firm that enhances productivity in commercial aquaculture. It researches genetics, genomics, and fish health and nutrition and operates salmon farms using proprietary tech. They produce AquAdvantage Salmon for human consumption and sell conventional Atlantic salmon, salmon eggs, fry, and byproducts.
AQB’s latest annual SEC filing reveals significant risks to their business, including a history of net losses, expected future losses, and difficulties in achieving profitability. Additionally, increased interest rates are expected to result in higher borrowing costs, reduced liquidity, and financing of the company's expansion plans.
During the fiscal year that ended on December 31, 2022, AQB’s total cost and expenses increased 9.3% year-over-year to $25.46 million. The company’s operating loss grew marginally year-over-year to $22.32 million. Also, its net loss and loss per share came in at $22.16 million and $0.31, respectively.
Additionally, as of December 31, 2022, AQB’s total liabilities increased 49.8% year-over-year to $21.92 million, while its total assets came in at $213.84 million, compared to $228.44 million as of December 31, 2021.
Analysts expect AQB to report a loss per share of $0.08 for the first quarter that ended March 2023. The company’s revenue for the same quarter is expected to decline 22.1% from the previous year’s period to $750 thousand. Furthermore, the company missed its consensus revenue estimates in three of the trailing four quarters.
In addition, the company is expected to report a loss per share of $0.09 for the second quarter ending June 2023. Its revenue for the current quarter is expected to decline 14.3% year-over-year to $916.67 thousand.
Over the past year, shares of AQB have plunged 65.2% to close the last trading session at $0.61.
AQB’s POWR Ratings reflect this poor outlook. The stock has an overall F rating, which equates to a Strong Sell in our proprietary rating system.
AQB has an F grade for Momentum and Quality and a D for Stability and Value. Within the same industry, it is ranked #51.
In addition to the POWR Ratings I’ve highlighted, you can see AQB’s rating for Growth and Sentiment here.
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PLBY shares were trading at $1.66 per share on Tuesday morning, up $0.05 (+3.11%). Year-to-date, PLBY has declined -39.64%, versus a 7.48% rise in the benchmark S&P 500 index during the same period.
About the Author: Aanchal Sugandh
Aanchal's passion for financial markets drives her work as an investment analyst and journalist. She earned her bachelor's degree in finance and is pursuing the CFA program. She is proficient at assessing the long-term prospects of stocks with her fundamental analysis skills. Her goal is to help investors build portfolios with sustainable returns.
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