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Keep These 2 Stocks out of Your Retirement Portfolio

With inflation still hovering at an uncomfortable level, demand is set to soften due to slowing discretionary expenditure by individuals and businesses. Hence, the outlook seems bleak for beaten-down stocks Warner Bros. (WBD) and Palantir Technologies (PLTR). So, these two stocks should in no way be added to one’s retirement portfolio. Continue reading…

The better-than-expected employment report for September indicated that the economy is not cooling down fast enough for inflation to be tamed. Despite the slight easing of inflation in October, the Fed may not reconsider its plan to keep raising rates. Furthermore, Fed Chair Jerome Powell cautioned that the final level of interest rates would be higher than expected.

With the recent earnings releases showing squeezed margins amid high borrowing costs and softening demand due to slowing discretionary expenditure, the going ahead is expected to become more challenging.

Moreover, the funding drought caused by rising interest rates is expected to make the survival of fundamentally weak companies difficult.

Therefore, it could be wise not to add struggling stocks Warner Bros. Discovery, Inc. (WBD) and Palantir Technologies Inc. (PLTR) to your retirement portfolio.

Warner Bros. Discovery, Inc. (WBD)

WBD operates as a global media company. It provides a complete portfolio of content, brands, and franchises across television, film, streaming, and gaming in over 50 languages.

For the third quarter of fiscal 2022 ended September 30, WBD reported an operating loss of $2.19 billion, compared to an operating income of $329 million in the prior-year quarter. Its net loss allocated to WBD came in at $2.31 billion and $0.95 per share, compared to a net income of $156 million and $0.24 per share a year ago.

In terms of the trailing-12-month gross profit margin, WBD’s 44.03% is 12.5% lower than the 50.32% industry average. And its trailing-12-month EBITDA margin of 16.86% is 11.5% lower than the 19.05% industry average. The stock’s trailing-12-month asset turnover ratio of 0.31% is 38.4% lower than the 0.49% industry average.

Analysts expect WBD to report a loss of $0.12 per share for the fiscal 2022 fourth quarter, ending December 2021, compared to an EPS of $0.09 during the prior-year quarter. Also, the company is expected to report a loss of $1.48 per share for the current fiscal year, compared to an income of $1.60 in the prior year. The company has also missed the consensus EPS estimates in three of the trailing four quarters.

The stock has slumped 18.7% over the past month and 61.2% year-to-date to close the last trading session at $9.84.

WBD’s POWR Ratings reflect its poor prospects. The stock has an overall F rating, equating to a Strong Sell in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.

WBD has a D grade for Momentum, Stability, Sentiment, and Quality.

WBD is ranked last among 16 stocks in the F-rated Entertainment – Media Producers industry.

Click here to access the additional POWR Ratings for WBD (Value and Growth).

Palantir Technologies Inc. (PLTR)  

PLTR builds and deploys software platforms that help organizations integrate their data, decisions, and operations at scale. The company operates through two segments: Government and Commercial.

For the fiscal 2022 third quarter ended September 30, 2022, PLTR’s adjusted income from operations decreased 30% year-over-year to $81.25 million, while its adjusted EBITDA decreased 26.8% year-over-year to $87.19 million. The company’s adjusted net income attributable to common shareholders declined 80.4% and 75% year-over-year to $16.08 million and $0.01 per share, respectively.

In terms of trailing-12-month EBITDA margin, PLTR’s negative 10.02% compares unfavorably with the 12.18% industry average. The stock’s trailing-12-month asset turnover ratio of 0.56% is 12% lower than the 0.64% industry average.

Analysts expect PLTR’s EPS for the entire fiscal year 2022 to decrease 64.1% year-over-year to $0.05. Moreover, PLTR has missed the consensus EPS estimates in each of the trailing four quarters.  

The stock has plummeted 12.8% over the past month and 62.3% year-to-date to close its last trading session at $6.98.

PLTR’s decline is also reflected in its POWR Ratings. It has an overall rating of D, equating to a Sell in our proprietary rating system. The stock has an F grade for Sentiment and a D for Value and Stability.

PLTR is ranked #21 of 26 stocks in the D-rated Software - SAAS industry.  

Click here to access additional POWR Ratings for Growth, Momentum, and Quality for PLTR.

WBD shares were trading at $10.80 per share on Thursday afternoon, up $0.96 (+9.76%). Year-to-date, WBD has declined -57.65%, versus a -15.94% rise in the benchmark S&P 500 index during the same period.

About the Author: Santanu Roy

Having been fascinated by the traditional and evolving factors that affect investment decisions, Santanu decided to pursue a career as an investment analyst. Prior to his switch to investment research, he was a process associate at Cognizant. With a master's degree in business administration and a fundamental approach to analyzing businesses, he aims to help retail investors identify the best long-term investment opportunities.


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