Ceres was the Roman goddess of agriculture. But fuel cell specialist Ceres Power (LSE: CWR) seems not to have been blessed by the gods lately. The Ceres Power share price has withered on the vine, falling 58% over the past year.

Below I consider whether the share price could soar to its old heights again and what that might mean for my portfolio.

What has happened to the Ceres Power share price?

The sort of downward movement we have seen in the Ceres Power share price can usually happen for a couple of main reasons. The business performance can disappoint, or shareholders simply reassess their previous valuation of a firm.

When it comes to business performance, I think Ceres has shown positive momentum. In a trading update this month, the company maintained its guidance for the year. It said that revenue and other income were expected to come in at £31.5 million, a 44% increase from the previous 12 months. The pipeline of commercial opportunities was described as “strong”. The company’s strategic partner, Doosan, continues to roll out Ceres’ technology.

So, if business is going well, why has the share price fallen? I think it is a reaction to what was perceived as a frothy valuation. Even now after the fall, Ceres commands a market capitalisation of over £1bn. At around 33 times last year’s revenue and other income, that does not strike me as cheap. Meanwhile, although it has ample liquidity, Ceres continues to make a loss. In its first half, the company reported an operating loss of £7.6m.

Possible drivers for recovery

So, investors seem to have marked Ceres down from its previous level as the firm’s financial outlook has not been good enough to justify it.

If revenue growth accelerates sharply, that could be a trigger for a higher share price. But given the share price falls already seen against a backdrop of strong revenue growth, I would be surprised if Ceres can add the sort of sales necessary to spark a large share price jump. As the company gets bigger, it will be harder for it to keep achieving the same sorts of sales increases in percentage terms.

Another possible trigger for the shares to move up could be a move to profitability. If the company starts turning a sizeable profit, that will validate its business model and could excite investors. But I doubt that will happen in the next several years. The company remains in a growth phase and often that includes burning cash. Indeed, I see the continued need to maintain liquidity as a risk. The loss-making company may seek to boost its cash levels in future with a rights issue. That could dilute existing shareholders.

My next move

So, although I see some possible drivers to justify a share price recovery at Ceres, I do not expect it to happen in the short term. The company continues to command a hefty price tag relative to its revenue. I will not be adding it to my portfolio.

Christopher Ruane has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

In the last few months, US ‘Big Tech’ and other growth stocks have had a troubled time. Microsoft down close to 10%, Amazon down around 20%, Meta (Facebook) down 12% (the list does not stop there). In fact, it has been so bad for the sector, one would struggle to find many examples of well performing, established growth companies.

Fundamentally, due to consensus being that the Federal Reserve will reduce asset purchases as well as increase rates in order to suppress inflation, the environment for US growth businesses is not a friendly one. Investors have indicated their fears through the markets.

However, have investors been too quick to come to judgement and instead overcorrected prices? Could now present an opportunity for me as a Foolish investor with a long-term outlook?

Headwinds

As mentioned previously, rate hikes present the most obvious and strongest headwind. The expected reduction in economic activity has caused fear for many investors when it comes to the ability to grow, innovate and earn future profits.

A further considerable headwind for US Big Tech (Amazon, Meta, Microsoft, Google’s parent company Alphabet and Apple) comes in the form of regulation. With a small number of companies being so dominant in their respective areas, it is not farfetched to worry about competition regulation.

The power of these companies due to the data they harvest, and the platforms they provide, results in being the target of unwanted political and regulatory attention. This is something that has been exaggerated recently with all of the Facebook leaks and allegations.

Tailwinds

The big five are established, profitable juggernauts that have not only led our society’s tech revolution but have also found themselves with considerable market power and influence.

This market share is not just a regulatory concern, it is also a huge opportunity. This ability to derive consistent and constant revenues is what underpins the big five as fundamentally sound businesses. Particularly as the world continues to move more and more digital they are impossible to ignore.

With strong business fundamentals, growth potential as well as profitability, they tick most of the boxes on an investor’ list. The question then becomes, are they overvalued or is it time to get in?

I believe that given the past few months of poor performance, coupled with the current market correction, these stocks are trading relatively cheap.

Conclusion

On the whole, it is a question of pricing. It is difficult to attack the underlying economic fundamentals of these companies, and thus it is a game of relative cost. Do you believe that the world has repriced US growth stocks? Or have they just temporarily been affected by an inflation-fighting economic environment. I believe that this is temporary, and the big five will prevail and derive profits and share price growth in the years to come. As a result, I think this is my opportunity to get in while shares are trading cheap… this is the chance I’ve been waiting for.

John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool’s board of directors. Teresa Kersten, an employee of LinkedIn, a Microsoft subsidiary, is a member of The Motley Fool’s board of directors. Tommy Williams has no direct positions in any of the mentioned companies. The Motley Fool UK has recommended Alphabet (A shares), Amazon, Apple, and Microsoft. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Key points

• Litigation is ongoing and impacting the Cineworld share price
• Box office revenue is gradually increasing
• May be a good time for me to add to my current holding

The Cineworld (LSE: CINE) share price has been extremely volatile recently. A number of factors are responsible for this movement. The pandemic has battered this cinema business and a litigation case is a grey cloud over the stock. As the world reopens though, is this stock on the path to recovery? If so, should I be adding to my current holding? Let’s take a closer look.

Cineworld vs. Cineplex

A big part of the recent negative Cineworld share price action has been a litigation case brought by Cineplex, a Canadian cinema company. This case is about the withdrawal of Cineworld from a deal to take over Cineplex, on account of the former’s inferior financial position during the pandemic.

In December 2021, the Ontario Superior Court of Justice ordered Cineworld to pay £722m in damages, a decision the company instantly appealed. This immediately resulted in a 39% fall in the Cineworld share price. This ruling, together with an $8.3bn debt pile, was an obvious worry for investors.

In a recent update to the case, in January 2022, Cineplex launched a cross-appeal against Cineworld’s own appeal. This related to the possibility that the amount of damages payable may be significantly less than £722m, as this might be deemed too high. This development resulted in a 5% fall in the Cineworld share price, although I do not consider this update terribly negative. By contrast, it suggests that Cineworld may not have to pay as much as originally thought. That would only be good news.

Box office revenue supporting the Cineworld share price

Two recent trading updates, from November 2021 and January 2022, imply that the negative impact of the pandemic is wearing off.

For the four months to 31 October 2021, global group box office revenue for October was 90% of 2019 levels. The UK and Ireland segment scored higher results, at 127%. In the January update, for the six months to 31 December 2021, global group revenue for December 2021 was 88% of 2019 levels. For the UK and Ireland, this figure was only slightly higher at 89%. The latter update also confirmed Cineworld had generated positive cash flow for the fourth quarter of 2021.

Having held Cineworld shares prior to the litigation judgement, I have been badly stung by the recent price movements. Nonetheless, the cross-appeal from Cineplex gives me hope that Cineworld’s damages may not be as severe as first thought. What’s more, box office revenue is gradually increasing. With a number of high-profile films scheduled for release in 2022, like the Avatar sequel, I expect this trend to continue. I am therefore taking this opportunity to add to my holding and improve my average weighted price.    

Andrew Woods owns shares in Cineworld. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Shareholders in THG (LSE: THG) have endured a gut-wrenching 16 months. Shares in the Manchester-based e-commerce company, formerly known as The Hut Group, have soared and then plunged. When the THG share price neared 840p in January 2021, its investors must have been in heaven. A year later, they’ve gone through hell. Here’s what went wrong for THG and how I feel about the stock today.

The THG share price soars and then slumps

Founded in 2004 to sell CDs, Manchester-based THG runs nearly 200 websites selling direct to consumers via its custom e-commerce platform. Its three main divisions (health, beauty and nutrition) sell products such as cosmetics and protein shakes. When THG floated in London on 16 September 2020, it priced its shares at 500p, valuing the business at £4.5bn and raising £1.9bn for the company and its owners. At its first-day peak, the THG share price leapt to 658p (+31.6%), before closing at 625p (+25%). This valued the group at £5.6bn.

But THG’s share price kept rising, driven higher partly by belief that THG Ingenuity — its proprietary e-commerce technology — was a hidden gem. Eventually, THG stock hit a record high of 837.8p on 12 January 2021. With the stock up 67.6% since listing, THG’s founder, executive chair and chief executive Matthew Moulding became a paper billionaire. Nice.

Over the next eight months, the share price drifted downwards, closing at 684p on 7 September 2021. Unfortunately, it was brutally downhill from there for THG’s shareholders as the stock plunged repeatedly. In five weeks, the shares lost almost 60% of their value. When I wrote about THG on 14 October, it had collapsed to 281.4p, crashing 57.7% in under five weeks. This followed a disastrous investor presentation on 12 October, when rash remarks by Moulding sent the stock southwards.

THG keeps on falling

On Friday, the THG share price closed at 126.5p, roughly a quarter (25.3%) of its 500p IPO price.  This valued the business at just £1.54bn. Also, the stock hit an all-time low of 118.3p on 24 January, before recovering to close at 121.3p. Obviously, this has been a catastrophic 12 months for the group — and partly for the reputation of the London Stock Exchange. Alas, the shares weren’t helped by an uninspiring trading update and profit warning on 18 January. Here’s how this stock has performed over five time periods: One day: -7.1% | Five days: -14.5% | One month: -44.8% | Six months: -78.2% | One year: -82.9%.

So far, nothing has stopped the ongoing decline in the THG share price. But THG’s sales growth is very robust, so it might well grow its way out of its current troubles, despite declining margins. Also, the group has the backing of a major investor: Japanese tech giant SoftBank. SoftBank invested $730m in THG in May at a share price of 596p, giving it an option to buy 19.9% of THG Ingenuity for $1.6bn within 15 months. Conceivably, Softback might bid for the whole group, plus THG has plans to spin off its dominant beauty business in a separate London listing this year.

I don’t own THG shares today, but I wouldn’t buy them at the current price. However, if the share price keeps falling, then I’d be tempted to buy at around £1. After all, boss Matt Moulding might decide to take his baby private again by offering a price premium to current shareholders. And almost anything can happen when formerly high-flying shares are cast into the bargain bin!

Cliffdarcy has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services, such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool, we believe that considering a diverse range of insights makes us better investors.

Will there be a further stock market crash in 2022? My Motley Fool colleague Cliff D’Arcy has warned us of some early signs to watch out for, though he doesn’t seem too pessimistic. And, well, when investors are keeping their eyes peeled for a crash, that’s usually precisely when one doesn’t happen.

No, stock market crashes tend to come along when we least expect them. But that doesn’t mean we should be complacent as 2022 progresses, as the world faces plenty of economic pressures. Here’s how I plan to minimise any possible downside in my investments this year.

Firstly, being poorly diversified left me more open to the 2020 crash. I was disproportionately invested in financial stocks, with holdings in banking and insurance. My investments have always favoured the financial sector, but this time it really left me open. One of my favourite stocks, Lloyds Banking Group, tanked. And it had made up around 20% of my portfolio at the time.

Over the past couple of years, I’ve improved my diversification. I now have some of my funds in a widely-spread investment trust. And I’ve also gone for consumer goods giant Unilever. I’m always wary of diversifying just for the sake of it and ending up with less attractive selections. But these are two I like on their own merits.

Don’t play a stock market crash

If we do face another crash, I’m going to avoid any temptations to play it. What do I mean by playing the crash? I mean I’m not going to pile into a company just because its share price has fallen. I think International Consolidated Airlines is a good example. About a year ago, a lot of investors got back into the stock, seeing it as an attractive recovery candidate. The company had successfully refinanced, and had plenty of liquidity (albeit with heavy debt). But it was clearly too soon, and despite early 2021 gains, the IAG share price headed south again.

At the same time, I will try to avoid moving into stocks that appear crash-resistant. Why is that bad? Well, by the time a stock market crash is upon us and I work out which stocks might be resistant — everyone else has too, and the prices have already climbed. As we have seen, that’s a short-term response, and they tend to fall back when the crash recedes. That brings me to a wider rule that I want to follow.

Don’t play the voting machine

I keep being drawn back to Benjamin Graham’s famous assertion that in the short run the market is a voting machine, but in the long run it’s a weighing machine. Throughout the crash, share prices were being driven by short-term investor sentiment. That’s the voting machine. And the weighing machine that evaluates the long-term prospects of the underlying companies was temporarily out of action.

So in any future stock market crash, I intend to ignore any short-term movements. And I’ll try not to buy anything unless there’s reasonable visibility of long-term valuations. In the meantime, I might pick up some more Lloyds shares.

Alan Oscroft owns Lloyds Banking Group and Unilever. The Motley Fool UK has recommended Lloyds Banking Group and Unilever. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

It’s fair to say that 2022 probably hasn’t started well for most investors. Then again, my heart does go out to anyone holding NIO (NYSE: NIO) stock in particular. The value of the Chinese electric vehicle (EV) maker has tumbled 38% year-to-date. But does this make it a buying opportunity for me?

NIO stock: is the drop overdone?

As one might expect, the capitulation of NIO’s share price isn’t down to one single factor. The crackdown by Chinese regulators on US-listed stocks hasn’t been warmly received by the market. The rise of the Omicron variant has also kept traders on their toes, as has the threat of earlier-than-expected rises in interest rates.

Even so, the fall in the price of NIO does seem overdone considering that it recently reported delivering 10,489 vehicles in December. That’s a near-50% jump compared to the same month in 2020. In November, the company also announced a Q3 loss narrower than that predicted by analysts.

Where next?

There are reasons for thinking the worst is over if it’s able to hit its own targets. As things stand, somewhere between 23,500 and 25,500 vehicles are expected to be delivered in Q4, comparing favourably to the 17,000-odd achieved one year ago.

Excitement over new vehicles could also lead to the company surprising on revenue. This stands at between $1.455bn and $1.568bn for the current quarter, compared to ‘just’ $1.017bn in 2021. 

Having said this, there’s no rule that says NIO stock won’t fall further. It’s clear that the global shortage of semiconductors won’t be fixed in a few weeks. And while it has already warned this will affect sales growth, NIO could be forced to revise its numbers in the next update.

It may also continue to be a victim of circumstances beyond its control. These include the ongoing rotation into value stocks that’s been apparent since the beginning of the year.

Competition hots up 

But there are other reasons I’m wary. For one, competition in the EV space will surely only get hotter as more established manufacturers catch up with the pioneers. NIO may emerge a victor but I don’t have the specialist knowledge to be able to say how likely this is. And as an investor, it’s never a great idea to leap beyond one’s circle of competence.

Another drawback is that a new car will never be considered an essential purchase. In other words, many of us can elect to keep our existing vehicles during troubled times. Sure, the arrival of legislation forbidding the sale of petrol and diesel cars from 2030 will force the adoption of EVs in the UK at least in the end. But how frequently do I plan to replace my car after that? Not very often.

Story stock

I don’t blame anyone for getting excited about NIO stock and the EV revolution in general. There aren’t many more seismic investment themes right now. 

Nevertheless, the huge selling pressure seen over the last 12 months serves as a reminder that a compelling growth story isn’t enough when the market hits an inevitable sticky patch.

Ultimately, NIO must be seen to be pulling ahead of the competition if it’s to recapture its lost form. I’m prepared to wait for that moment, if it comes at all, before putting my money to work here. In the meantime, I’ll get my exposure to EVs via this immensely popular fund.

Paul Summers has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

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I’m looking for the best dividend stocks to buy for my portfolio in February. I think these UK shares could provide me with a steady income now and for many years into the future. Each currently provides a dividend yield north of 4%.

Tritax Eurobox (4.5% dividend yield)

I’ve sought to grab a slice of the e-commerce boom by buying shares in Tritax Big Box REIT. This is a UK share that provides the warehouses and distribution hubs that allow companies to get their products to consumers. The only problem with Tritax Big Box is that it only operates in Britain, so it has very little geographical diversification.

Sure, the UK is Europe’s largest (and one of its fastest-growing) e-commerce markets. But I think investing in its continental cousin Tritax Eurobox (LSE: EBOX) could be a good idea to expand my portfolio’s territorial footprint. This particular dividend stock owns assets in Germany, France, Spain, Italy and a handful of other large European economies. This includes the fast-growing emerging market of Poland.

Tritax Eurobox has plenty of financial firepower to continue building its portfolio too, following fund raising in September and December of last year. Earlier this month, it completed an acquisition of another logistics property in Sweden. And it has a pipeline worth around €300m to continue executing its growth strategy.

Acquisitions can be dangerous as it can expose a firm to multiple risks, such as unexpected costs and disappointing demand. But Tritax Eurobox has a strong track record on this front and this provides me as a potential investor with decent peace of mind.

Springfield Properties (4.2% dividend yield)

I also think holding shares in housebuilders is a good idea as Britain’s home supply crunch drags on and property prices steadily rise. I’m considering bulking up my exposure to this sector by buying shares in Scottish housebuilder Springfield Properties (LSE: SPR). This company trades on a forward P/E ratio of 9.5 times predicted earnings. It also offers that chunky yield, both of which combine to offer supreme value, to my eyes.

Like all UK shares, Springfield doesn’t come without risk. A rapidly-slowing domestic economy could prove catastrophic for homes demand as confidence sinks and buyer affordability comes under pressure. The scheduled withdrawal of Help to Buy in March 2023 throws up another potential danger.

It’s my opinion though that demand for newbuild properties should continue to outstrip supply for many years ahead. Government policy hasn’t got to grips with the problems hampering construction rates. At the same time, interest rates are likely to remain below historical norms and competition in the mortgage market should help first-time buyers get onto the property ladder too.

Besides, as estate agency Savills recently noted: “Schemes including Deposit Unlock, First Homes and an expanded Shared Ownership programme may fill a large proportion of the gap left by Help to Buy.”

So I think construction stocks like Springfield Properties remain great UK shares to own.

Royston Wild has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Shares in up-and-coming electric vehicle (EV) manufacturer Rivian (NASDAQ: RIVN), which went public last year, have taken a big hit recently. Year-to-date, the stock is down a massive 45%.

Has this huge share price fall created a buying opportunity for me? Let’s take a look.

Rivian stock: is now the time to buy?

There’s no doubt Rivian has a good product. Recently, its R1T model won the prestigious MotorTrend Truck of the Year award. That’s a very impressive achievement. It also had 71,000 pre-orders for its EVs as of mid-December. What I want to know however, is whether Rivian has a reasonable valuation. Because if I overpay for the stock, it could turn out to be a poor investment for me.

Now, Rivian doesn’t have a price-to-earnings (P/E) ratio. That’s because, unlike larger EV manufacturers such as Tesla, it’s not yet profitable. This year, it’s expected to generate a net loss of $4.7bn. However, it does have a price-to-sales ratio, so we can look at that to get a feel for the value on offer here.

Currently, the company has a market capitalisation of $51.4bn. Meanwhile, this year, analysts expect Rivian to generate sales of $3.53bn. This means that at the current share price of $57, the price-to-sales ratio here is about 14.6.

I wouldn’t say that valuation is outrageous, given that Rivian is expected to generate huge growth in the years ahead. It is a little too high though. After all, Tesla has a price-to-sales ratio of a much lower 10.6. And supply chain issues could impact the company’s growth rate in the near term. Last week, Tesla told investors that it’s experiencing supply chain issues at present and expects them to last through 2022.

What are the short sellers doing?

One way of determining whether the valuation is too high is to look at what the short sellers are doing. Are institutional investors such as hedge funds betting against the stock? If they are, it could mean the valuation is still too elevated.

Looking at short interest data from 2iQ Research, I can see that, at present, about 33 million Rivian shares are on loan. That represents about 21% of the free float. That’s a high level of short interest. This indicates that lots of sophisticated investors believe the stock is too expensive and see further downside here.

Personally, I see the level of short interest here as concerning. That’s because heavily-shorted stocks generally go on to underperform. We’ve certainly seen this in the EV sector over the last year or so. Heavily-shorted EV stocks such as Workhorse, Lordstown Motors, and Canoo have all tanked. The high short interest indicates to me that Rivian is a risky stock right now.

Better stocks to buy

Of course, after such a huge share price recently, there’s always the chance that Rivian stock could bounce in the near term. I wouldn’t be surprised at all if we do see a bit of a rebound at some stage.

However, given the high level of short interest, I won’t be buying the stock in the near future. In my view, there are much better growth stocks to buy today.

Edward Sheldon has no position in any of the shares mentioned. The Motley Fool UK has recommended Tesla. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.