Snap, Twitter and 1 other stock you should sell right now

Running inflation and the Fed's aggressive rate hikes have led advertisers to cut spending, which, in turn, is hurting social media companies. With the Fed expected to launch another significant rate hike this month, we think investors should avoid Twitter (TWTR), Snap (SNAP) and Groupon (GRPN). Read on….

shutterstock.com - StockNews

The Consumer Price Index (CPI) report came out hotter than expected, with inflation up 8.3% in august. This could prompt the Fed to continue its rate hikes, with several analysts now expecting a 100 basis point hike next week.

Social media companies struggled as advertisers cut spending amid rate hikes and soaring inflation. "If you want proof that companies are nervous about the economic outlook, just look at how media platforms and marketing agencies lament a tougher advertising market," said Russ Mold, chief investment officer of AJ Bell. .

Against this backdrop, we believe investors should avoid Twitter, Inc. (TWTR), Snap Inc. (SNAP), and Groupon, Inc. (GRPN).

Twitter, Inc. (TWTR)

TWTR operates as a popular platform for public expression and real-time conversation. The company also offers promotional products that allow advertisers to promote brands, products and services.

On July 8, TWTR received an alleged termination notice from Elon Musk. In response, the board issued the following statement - "We are committed to completing the transaction at the price and terms agreed to with Mr. Musk and expect to pursue legal action to enforce the merger agreement. We are confident that we will prevail in the Delaware Court of Chancery."

For the fiscal quarter ended June 30, 2022, TWTR revenue decreased 1.2% year-over-year to $1.18 billion. Operating income was negative $343.76 million, down 1,236.3% from the prior year period. The company's net earnings and net earnings per share were minus $270.01 million and minus $0.35 million, respectively, down 511.3% and 537.5% from the period of the previous year.

The EPS estimate of $0.25 for the fiscal fourth quarter ending December 2022 reflects a 25.2% year-over-year decline. TWTR has missed street EPS estimates in three of the past four quarters.

The stock has fallen 30% over the past year and 5.7% over the past month to close the last trading session at $41.74.

TWTR's POWR ratings reflect this bleak outlook. The stock has an overall rating of D, which is equivalent to a sell in our proprietary rating system. POWR ratings are calculated considering 118 different factors, with each factor weighted to an optimal degree.

TWTR has an F rating for Sentiment and a D for Momentum. It is ranked #45 out of 64 F-rated internet industry stocks. Click here to view additional POWR ratings for TWTR's growth, value, stability and quality.

Snap Inc. (SNAP)

SNAP operates as an international camera company. It offers Snapchat, an app that lets people communicate visually through short videos and images.

For the fiscal second quarter ended June 30, SNAP's total cost and expenses increased 28.7% from the prior year quarter to $1.51 billion. Adjusted EBITDA decreased 93.9% from the prior year quarter to $7.19 million. Non-GAAP net loss and net loss per share were $29.60 million and $0.02, respectively, indicating a 120.5% and 120% year-over-year increase .

Analysts expect SNAP's EPS to decline 50.2% year-over-year to $0.11 for the fiscal quarter ending December 2022. Its consensus revenue estimate is expected to to be $1.36 billion over the same period.

The stock fell 83.5% from...