As the ghost of inflation continues to haunt the U.S. economy, investors have the daunting task of navigating the choppy financial markets. Amid the uncertainty, high-risk stocks in inflation are under the scanner for most investors.
Even as reports suggest an easing in consumer price increases, the stubbornness of inflation persists, raising concerns over the marketplace.
This unyielding inflationary trend challenges the Federal Reserve’s valiant efforts to stabilize the economy. With core inflation marking a significant 0.4% rise from April to May and remaining stubbornly above the 2% target, it’s clear that we’re locked in a high-stakes game.
As the inflationary bogeyman continues to lurk, certain stocks feel the pinch more than others. High-risk stocks affected by high inflation could lead to some severe wallet woes. So, let’s delve into the realm of stocks to sell on high inflation.
Redfin (RDFN)
Amidst the challenging real estate brokerage space, Redfin (NASDAQ:RDFN) has struggled. The tech-forward firm, famous for its stripped-down approach and discount seller fees, is navigating a choppy market, falling behind its peers.
The first quarter painted a grim picture, with Redfin’s core brokerage sales falling 28% year-over-year to $127 million, primarily driven by a 31% drop in brokerage transactions.
This, along with a $67 million adjusted EBITDA loss for the quarter, puts it in a precarious position for the rest of the year.
Further, the company’s balance sheet looks less than rosy, with under $300 million in cash compared to a hefty debt load of more than $1.14 billion. Despite wielding the axe on costs amid the real estate downturn, Redfin’s path to profitability remains clouded with massive uncertainty ahead.
Rocket Companies (RKT)
Rocket Companies (NYSE:RKT), once a darling in the U.S. mortgage underwriting scene, has fallen from grace and then some.
Its financial trajectory has been a rollercoaster ride, following a 270% revenue rocket surge from 2018 to 2020 to a whopping $15.9 billion. However, the company’s flight path has turned downward in the pandemic-era market.
Post-pandemic conditions and skyrocketing mortgage rates have proven to be major headwinds for the firm triggering, with its sales tumbling to $6.0 billion last year.
The outlook for 2023 seems grim, with forward sales estimates at a negative 24%. Analysts expect sales to drop to $3.9 billion this year, a decline of $2.1 billion from its sales figure in 2022.
Carvana (CVNA)
Carvana (NYSE:CVNA) is a top online used-car dealer that’s been on a tumultuous ride of late. The euphoria has been fleeting despite the management’s optimistic second-quarter guidance boosting investor confidence.
On the back of many headwinds led by crippling inflationary pressures, the firm’s top, and bottom-line results are firmly in the red. The numbers from analysts have added to the gloom, forecasting a sizable loss of $5.40 per share this year and a subsequent loss of $4.78 per share come 2024.
Carvana rode high on the wave of rapid retail unit sales powered by aggressive spending for years. The strategy, however, hit a dead end last year, prompting a change of gears. Since then, unit sales have receded from their lofty heights as the company pivots towards belt-tightening.
Alarmingly, Carvana’s Altman Z-Score, a predictor of bankruptcy risk, sits at a disconcerting 0.71, hinting at a potential financial debacle within two years making it one of the high-risk stocks to avoid.
On the date of publication, Muslim Farooque 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
