3 risky crypto stocks that investors should avoid

Bitcoin, the largest cryptocurrency, has been trading in a tight range due to the volatile economic backdrop. Also, with a disappointing global growth forecast, the crypto market may brace for more volatility. Against this backdrop, we believe crypto stocks Block, Inc. (SQ), Silvergate Capital (SI) and MicroStrategy (MSTR) are best avoided. Continue reading….

The ongoing war in Ukraine and the 40-year high inflation affects cryptocurrency prices. Also, the leading cryptocurrency, Bitcoin, fell below $23,000 recently after the second quarter GDP report. Bitcoin has not been above $50,000 since late December 2021. The cryptocurrency has been trading between a tight range of $22,000-$25,000.

Bitcoin fell again on Thursday on US labor market figures which indicated a weakened market. On top of that, increasing volatility in the crypto market is the IMF’s forecast that economic growth will slow from 6.1% last year to 3.2% this year.

The broader economy can affect the performance of the risky asset in the short term. Therefore, we believe that the crypto shares Block, Inc. (SQ), Silvergate Capital Corporation (SAY), and MicroStrategy Incorporated (MSTR) is best avoided now.

Block, Inc. (SQ)

SQ offers tools that enable merchants to accept card payments and provides reporting and analytics and next-day settlement. The company’s hardware product offerings include Magstripe readers and Contactless and chip readers, and it offers software products including Square Point of Sale, Square Appointments and Square for Retail.

For the fiscal second quarter ended June 30, SQ’s total net income fell 5.9% year over year to $4.40 billion. Adjusted net income fell 56.8% from the prior quarter to $110.74 million. Adjusted net income per share came in at $0.18, down 63.3% from the same period last year.

Analysts expect SQ’s fiscal 2022 revenue to increase marginally year-over-year to $17.76 billion.

The stock has fallen 66.3% in the past year and 44.5% so far this year to end its last trade at $89.70.

SQs POWR Ratings reflects this bleak outlook. The share has an overall F rating, which corresponds to a strong sell in our proprietary rating system. The POWR ratings are calculated by considering 118 different factors, with each factor weighted optimally.

SQ has a stability grade of F and a growth, value and sentiment grade of D. The I 109 share Financial services (business) industry, it is ranked #103. The industry is rated D. click here to see the additional POWR ratings for SQ (Momentum and Quality).

Silvergate Capital Corporation (SAY)

SI is the bank holding company of Silvergate Bank, which provides banking products and services to businesses and individual customers in the United States. The company accepts deposit products and offers loan products.

SI’s total interest expense increased 262.7% year over year to $1.04 million in its fiscal second quarter ended June 30. Total non-interest expenses rose 42% from the same period last year to $30.55 million.

The stock is down 30.7% year-to-date and 8.1% over the past six months to end its last trade at $102.68.

SI’s overall D grade translates to Sell in our POWR ranking system. The share has an F grade for value and stability and a D for quality.

SI is ranked #41 out of 42 Pacific regional banks industrial stocks. To view the additional POWR growth, momentum and sentiment ratings for SI, click here.

MicroStrategy Incorporated (MSTR)

MSTR is a supplier of software and services for business analysis. The company’s offerings include MicroStrategy, an enterprise platform that provides a modern analytics experience. It also offers MicroStrategy Support which helps customers and improves the overall experience.

For the fiscal second quarter ended June 30, MSTR’s total revenue fell 2.6% year over year to $122.07 million. Non-GAAP net loss and non-GAAP loss per share came in at $1.05 billion and $92.81, up 262.8% and 212.9% from the prior year.

The consensus EPS estimate of $0.49 for the quarter ending September 2022 indicates a year-over-year decline of 73.7%. Likewise, the consensus revenue estimate for the same quarter of $127.58 million reflects a marginal decline from the prior year.

MSTR’s stock has fallen 53.9% in the past year and 43.2% so far this year to end its last trade at $309.31.

It’s no surprise that MSTR has an overall F rating, which equates to strong sales in our proprietary rating system. The stock has a sentiment and quality rating of F and a value, momentum and stability rating of D. In the F-rated, 154 share Software – Application industry, it is ranked last.

In addition to the POWR Rating grades we have provided above, you can see MSTR’s rating for Growth here.

SQ shares were trading at $91.01 per share on Friday morning, up $1.31 (+1.46%). So far this year, SQ has fallen -43.65%, compared to a rise of -12.34% in the benchmark S&P 500 over the same period.

About the Author: Anushka Dutta

Anushka is an analyst whose interest in understanding the impact of broader economic changes on financial markets motivated her to pursue a career in investment research.

More…

The mail 3 risky crypto stocks that investors should avoid appeared first StockNews.com