High-growth technology stocks, which have suffered massive losses over the past several months, regained their footing in recent sessions as investors rotate back into the sector at the expense of economy-linked stocks and sectors, such as energy, materials, and financials.
That development has seen the tech-heavy NASDAQ Composite rise nearly 16% since hitting a one-year low on Mar. 14, as the tech trade came back into favor.
Therefore, here are three names to consider as investors give fast-growing tech stocks another look.
1. Shopify
- Year-To-Date Performance: -46%
- Percentage From ATH: -57.8%
- Market Cap: $93.7 Billion
Widely viewed as one of the big winners of the 2020-21 COVID pandemic, Shopify (NYSE:SHOP) stock has fallen out of favor this year amid a general selloff in high-growth technology companies, especially those with lofty price-to-earnings (P/E) ratios.
After scoring sizable gains of 184% and 21% in the preceding two years, shares of Shopify have lost nearly half their value in 2022 due to the ongoing impact of several negative factors plaguing the e-commerce specialist. Even more alarming, Shopify shares—down 46% year-to-date—have also pulled back almost 60% since touching a record high of $1,762.92 in November 2021.
SHOP sank to its lowest level since April 2020 at $510.02 on Mar. 14, before making a comeback to end Tuesday’s session at $743.98. At current levels, the Ottawa, Canada-based online marketplace platform provider has a market cap of $93.7 billion.
Besides macroeconomic-related selling pressure resulting from rising interest rates, sentiment on the out-of-favor name—which helps merchants set up online retail shops and manage their brands—took another hit amid concerns over its growth prospects in a post-pandemic world.
Shopify warned on its Q4 earnings report in mid-February that its COVID-fueled sales boost would fade this year amid a slowdown in e-commerce activity as well as potential negative impacts on consumer spending due to soaring inflation.
Despite the dramatic deceleration in growth, Shopify stock seems poised to extend its rebound in the months ahead, thanks to the company’s status as one of the leading names in the e-commerce software sector with nearly 2 million merchants across 175 countries on its e-commerce platform.
Not surprisingly, 21 out of 40 analysts surveyed by Investing.com rate SHOP stock as "Outperform," implying roughly 35% upside from current levels to $1,006.91/share. Only one analyst surveyed has a "Sell" rating on the name.
Source: Investing.com
2. Uber Technologies
- Year-To-Date Performance: -11.3%
- Percentage From ATH: -41.9%
- Market Cap: $72.7 Billion
Shares of Uber Technologies (NYSE:UBER) have struggled in recent months as investors fled high-growth technology names that are most sensitive to rising rates due to their rich valuations.
The ride-hailing company saw its stock drop to the lowest level since May 2020 at $28.28 in early March, briefly losing as much as 32% at one point this year amid the broad-based selloff in the tech sector.
UBER has since recouped some of its steep declines, however it is still down 11.3% year-to-date, and about 42% away from their record peak of $64.05 reached in February 2021. Shares ended at $37.19 yesterday, earning the San Francisco, California-based mobility-as-a-service specialist a market cap of $72.7 billion.
Investors have piled back into the beaten-down name amid a raft of positive developments, including agreements to partner with taxi companies in both New York City and San Francisco to add more taxis to its platform, as well as news that it secured a new two-and-a-half-year license to operate in London.
Uber reported upbeat Q4 financial results in February, topping expectations for both earnings and revenue. It also reported the most active users in its history. The strong figures prompted Uber’s management to lift its outlook for the current quarter, citing "significant" improvement demand for mobility.
Taking that into account, UBER could see an increase of around 11% in the next 12 months, according to the InvestingPro model, bringing it closer to its fair value of $41.24 per share.
Source: InvestingPro
Independent analysts are even more optimistic: the average analyst price target for UBER, among 46 analysts polled, is around $59.00, representing an upside of approximately 60% from current levels over the next 12 months.
Source: Investing.com
3. Twitter
- Year-To-Date Performance: -5.8%
- Percentage From ATH: -49.6%
- Market Cap: $32.5 Billion
Twitter (NYSE:TWTR) has seen its stock endure some turbulence lately as fears over the Federal Reserve’s aggressive plans to raise interest rates sparked a rout in many top-rated technology companies over the past several months.
Shares of the social media platform tumbled to a 20-month low of $31.30 on Feb. 24, down by as much as 26% at one point this year amid a sharp reset in valuations across the frothy tech space, before staging a mild rebound to trim its year-to-date losses to roughly 6%.
TWTR closed at $40.69 last night, approximately 50% below its record peak of $80.75 reached in February 2021. Based on current valuations, the market cap of the San Francisco, California-based company is $32.5 billion.
Considering Twitter’s unique position in the mobile advertising industry, we believe TWTR is ready to extend its comeback after finally showing signs of bottoming following a brutal selloff which has seen it lose half its market value over the past 12 months.
Under the leadership of new CEO Parag Agrawal, who assumed the role after co-founder Jack Dorsey stepped down in November, Twitter has shown a new-found commitment to returning more capital to shareholders, announcing a $4 billion stock buyback program in mid-February.
Agrawal, who previously served as the company's chief technology officer, also wants to accelerate Twitter’s initiatives to bring new products to customers, including different subscription-based services.
Despite missing analyst estimates for both Q4 earnings and revenue, the social media network reiterated that its previously stated goal of reaching 315 million monetizable daily active users (mDAUs) by the end of 2023 remained the same. Twitter had 217 million mDAUs as of Dec. 31, an increase of 13% year-over-year.
Indeed, the quantitative models in InvestingPro point to a gain of almost 12% in Twitter stock from current levels over the next 12 months, bringing shares closer to their fair value of $45.46.
Source: InvestingPro