Top Stocks To Short Today As Tech Sell-Off Causes Nasdaq To Plunge
Markets had a slightly sobering opening today after the S&P 500 and Nasdaq NDAQ indices ended last night at their highest-ever closing values. This morning’s weekly Department of Labor jobs update is partly responsible, as another 881,000 Americans opened new unemployment claims over the last week. In particular, as of this writing, the S&P was down over 100 points, the Dow was down over 600 points, and the NASDAQ shed over 4.5%. This pullback, however, is far from a correction to the historically high valuations currently on display. The Investors Intelligence Sentiment Index Bulls to Bears ratio is at 3.7, sharply higher than the 3.0 threshold which has triggered past selloffs. And CitiGroup’s C Panic/Euphoria index hit 1.13, almost 3X the level which could indicate irrational exuberance in stock markets right now. For those who anticipate that today’s tremors might widen into a broader market pullback, Q.ai’s artificial intelligence (AI) systems identified five Top Shorts for today. These companies have been carefully graded on parameters including Technical, Growth, Momentum Volatility, and Quality Value – and are prime picks for anybody seeking to open or continue a short position.
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American Eagle Outfitters Inc (AEO)
First on today’s list is American Eagle Outfitters AEO . Our systems rated the stock a C in Technical, D in Growth, D in Momentum Volatility, and D in Quality Value. The Pittsburgh, PA-based apparel company closed up 1.8% to $13.01 on its 10-day moving average, but is down 8.7% for the year, having missed on the entire rally which has lifted sectors such as clothing, service, technology, and manufacturing. Revenue grew by 4.69% over the last three fiscal years to $4308.21M in the last fiscal year, which compares to $3795.55M three years ago. EPS has been essentially flat over the past three years, having fallen from $1.13 to $1.12. ROE is also slightly down, having contracted from 16.66% to 15.09%. Forward 12M revenue is expected to grow by 6.66%, yet our AI systems likely found that number insufficient to justify the forward 12M P/E of 39.27.
Beyond Meat Inc (BYND)
Second on today’s set of Top Shorts is another well-known company, Beyond Meat, Inc., a LA-based producer of vegetarian meat substitutes. Although the company has grown rapidly since its 2014 takeoff, our artificial intelligence gave the company a D in Technical, a D in Growth, an F in Momentum Volatility, and a C in Quality Value. The stock closed down 4.1% to $129.7 against its 10-day moving average of $129.24. Although the stock has been buoyed by the bull market (up 71.46% for the year), fundamentals are weak. Revenue grew by 34.56% in the last fiscal year to $297.9M, which is a growth of 1130.32% over the last three fiscal years from $32.58M three years ago. EPS shrank by -72.91% in the last fiscal year and -98.57% over the past three, indicating problems extending beyond COVID. ROE has improved from -76.43% three years ago to -5.39% in the last fiscal year. Forward 12M revenue is expected to grow by 23.64%
Chewy Inc (CHWY)
The next Top Short on our list is Chewy Inc CHWY , which received a D in Technical, D in Growth, C in Momentum Volatility, and F in Quality Value from our artificial intelligence technology. The company is a Florida-based online retailer for pet food and related products, and the stock closed up 0.97% to $70.1 against a 10-day average of $60.34 and a 22-day average of $57.57. Chewy shares have also benefited from the 2020 rally, closing up 136.66% for the year. Yet profitability is still a long way off, as operating income was -$252.73M over the past fiscal year, which is hardly better than -$275.86 three years ago. Revenue grew by 10.57% in the last fiscal year to $4846.74M, a growth of 154.68% over the last three fiscal years from $2104.29M three years ago. In addition, EPS is still in the red at -$0.63, compared to -$2.67 three years ago. Forward 12M Revenue is expected to grow by a paltry 3.52%, which may have contributed to the stock’s poor ratings.
Crowdstrike Holdings Inc (CRWD)
Continuing our list of Top Shorts is Crowdstrike Holdings Inc CRWD , which our AI tools rated as a D in Technical, C in Growth, D in Momentum Volatility, and F in Quality Value. The firm is a Sunnyvale, CA-based cybersecurity player, and has served in several high-level investigatory roles on breaches like the 2014 Sony Pictures hack, and the 2015-2016 Democratic National Committee breaches. The stock is up 187.36% for the year, having closed down 1.13% to $142.07, but operating income has fallen to -$146.06M from $-131.44M three years ago. Revenue grew by 35.91% in the last fiscal year to $481.41M, a growth of 450.96% over the last three fiscal years from $118.75M three years ago. EPS is also negative at -$0.96, compared to -$3.38 three years ago. In percentage terms, EPS grew by -44.03% in the last fiscal year, and -84.12% over the past three. And operating income grew by -16.33% in the last year, compared to -7.02% over the past three. Forward 12M revenue Is expected to grow by 16.98%.
Datadog Inc (DDOG)
Our final Top Short for the day is DataDog Inc DDOG , which earned a C in Technical, D in Growth, D in Momentum Volatility, and D in Quality Value. Headquartered in New York City, the firm provides monitoring and analytics services for cloud applications, and its tools are compatible with all major cloud compute providers. Despite the broad tech rally, however, DataDog’s EPS was -$0.12 in the last fiscal year, which is three times worse than -$0.04 three years ago. ROE was -3.95% in the last year, and operating income shrank by -93.29% in the last fiscal year, and -54.26% in the last three fiscal years. Revenue is the firm’s bright spot, having grown to $362.78M in the last fiscal year (up from $100.76M three years ago), yet operating income has worsened from -$2.96M three years ago to -$20.14M in the last. Forward 12M revenue is expected to grow by 16.3%.
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