In this article, we will discuss some of the notable tech stocks trending on Friday.
Tech stocks in the US are under pressure today after Tesla, Inc. (NASDAQ:TSLA)’s Elon Musk warned of a “super bad feeling” regarding the economy and news of layoffs from several companies kept making headlines. The S&P 500 Index, the Dow 30 Index, and the tech-heavy NASDAQ Composite Index are all down 1.54%, 0.93%, and 2.44%, respectively, as of 12:34 PM ET. Meanwhile, some of the other stocks have declined due to mixed quarterly results and downgrades by analysts. There is also speculation of a significant potential takeover in the tech sector. Stocks such as CrowdStrike Holdings, Inc. (NASDAQ:CRWD), Meta Platforms, Inc. (NASDAQ:FB), and Airbnb, Inc. (NASDAQ:ABNB) are making headlines today.
Let’s look at why these tech stocks are trending today and discuss how hedge funds are positioned in them.
10. Tesla, Inc. (NASDAQ:TSLA) is down 8.06% as of 12:24 PM ET after reports that CEO Elon Musk is looking to reduce the headcount of the Austin, Texas-based electric vehicle company by 10% and also implement a hiring freeze. Musk shared these updates with his executives through an email. He is citing a “super bad feeling” regarding the outlook on the economy as the reason for these cost-cutting actions. This update comes a day after Musk instructed all employees to return to the office physically for at least 40 hours per week or face the possibility of termination.
In its Q1 2022 investor letter, Tesla, Inc. (NASDAQ:TSLA) was mentioned by Baron Funds. Here’s what the asset management firm said:
“During the first quarter, we bought back shares in Tesla, Inc., which designs, manufactures, and sells electric vehicles, solar products, energy storage solutions, and batteries. We believe that despite the run in the stock over the last few years, Tesla presents a favorable risk/reward profile and remains a Big Idea with only about 1% market share of the automotive market. Since we bought the stock during the first quarter, shares increased 27.1%, despite a complex supply-chain environment, on continued revenue growth and record profitability. Robust demand and operational optimization allow the company to offset inflationary pressures while vertical integration provides flexibility around supply bottlenecks. Moreover, we expect new localized manufacturing capacity to drive additional efficiencies while software initiatives, including the autonomous driving program, are accelerating, offering valuable optionality to the stock.”
Tesla, Inc. (NASDAQ:TSLA) was held by 80 hedge funds at the end of Q1 2022. Citadel Investment Group was long over 21 million shares of Tesla, Inc. (NASDAQ:TSLA) during the first quarter of the year.
9. Dropbox, Inc. (NASDAQ:DBX) has risen 6% as of 12:24 PM ET after The Deal.com revealed that the California-based provider of file hosting service might have been approached for a takeover by a consulting firm representing a potential buyer. Dropbox, Inc. (NASDAQ:DBX) has been in the news regarding a potential takeover after activist Elliot Management took a stake in the company nearly a year ago. Rishi Jaluria at RBC Capital thinks that Dropbox, Inc. (NASDAQ:DBX) can be a target for technology giants like Adobe, Inc. (NASDAQ:ADBE) or Salesforce, Inc. (NYSE:CRM).
RGA Investment Advisors LLC shared its stance on Dropbox, Inc. (NASDAQ:DBX) in its Q4 2021 investor letter. Here’s what the firm said:
“Dropbox really let us down this quarter, not because they did anything wrong, but because during our entire tenure holding this stock, it outperformed in periods where long duration assets (aka higher growth) sold off. This time it did not. Despite people asserting this market bifurcation is about selling growth and buying value, Dropbox shares suffered one of their worst stock market quarters in recent years. It’s hard to identify a specific reason, though one story out there is how some investors thought the company could raise the bar on its 30% targeted operating margin upon achieving those levels. Along with the company’s earnings report, instead of raising the bar, they explained how there is more room to drive margin, but in the mean-time the preference at the company is for investing the potential excesses to drive further growth.
This year, the company will have repurchased nearly 9% of its diluted shares outstanding (perhaps more given the Q4 route in shares) and will have delivered a free cash flow yield upwards of 7.5% on its year-end stock price, while growing upwards of 12%. This is a potent recipe for outstanding returns, yet in a market that’s theoretically seeking cash flow, the stock was punished. We think this is one of the most nonsensical moves of them all and find Dropbox to be an especially compelling opportunity heading into 2022. The top line is certainly growing, as the company continues to withstand competition from Microsoft, Google and Box. Plus management continues to make smart tuck-in acquisition, showing what may emerge as a scalable, repeatable recipe for deepening their relationship with existing customers, thus driving down churn and setting the stage for prolonged ARPU growth. This potential strategy started with HelloSign, and is further validated with the acquisition of DocSend…” (Click here to see the full text)
Of the 912 hedge funds in Insider Monkey’s database, 44 funds held a position in Dropbox, Inc. (NASDAQ:DBX) as of Q1 2022.
8. Twitter, Inc. (NASDAQ:TWTR) is 2.36% in the green as of 12:25 PM ET after the waiting period under the Hart-Scott-Rodino (HSR) Act lapsed last night. This means that the $44 billion takeover deal by Elon Musk has been given an all-clear by the Federal Trade Commission (FTC) and the Department of Justice (DoJ). There were speculations that the takeover had gained regulators’ interest due to concerns related to national security as foreign investors were involved in the deal. Following the fake and spam account crisis revealed in Q1 2022 results by Twitter, Inc. (NASDAQ:TWTR), it is understood that Musk will renegotiate the deal at a lower price.
Twitter, Inc. (NASDAQ:TWTR) was held by 68 hedge funds at the end of Q1 2022. Elliott Management was the leading hedge fund investor in Twitter, Inc. (NASDAQ:TWTR) during Q1.
7. Apple Inc. (NASDAQ:AAPL) has plummeted 3.66% as of 12:25 PM ET after Katy Huberty at Morgan Stanley posted a cautionary note about the slow down in net revenue growth of the company’s App Store to 4% YoY during May. The analyst highlighted that as per her estimates, the growth rate was only 8% YoY during April, despite easier comparatives. Huberty also observed that the growth rate is decelerating across all regions in the US. As a result, she sees downside risk for the revenue growth during the current quarter. Huberty has given an Overweight rating on Apple Inc. (NASDAQ:AAPL) stock with a price target of $195.
Apple Inc. (NASDAQ:AAPL) was discussed in the Q4 2021 investor letter of ClearBridge Investments. Here’s what the firm said:
“Despite these mixed emerging growth results, the ClearBridge Global Growth Strategy outperformed the benchmark due to resilience among our secular and structural growth holdings. The bulk of these contributions came from U.S. mega-cap growth stocks Apple and Microsoft which continued to uniquely act both offensively and defensively as they have through most of the pandemic.”
At the end of Q1 2022, Apple Inc. (NASDAQ:AAPL) was held by 131 hedge funds.
6. Micron Technology, Inc. (NASDAQ:MU) has slipped 7.09% as of 12:27 PM ET after the Boise, Idaho-based memory and storage product manufacturer was downgraded from a Neutral to an Underweight rating by Harsh Kumar at Piper Sandler. The analyst also slashed the price target on Micron Technology, Inc. (NASDAQ:MU) from $90 to $70. Kumar downgraded Micron Technology, Inc. (NASDAQ:MU) stock due to its significant exposure to discretionary consumer electronics products like smartphones, personal computers, and other equipment whose demand is related to the performance of the macro economy. According to the analyst, the company has 55% exposure to these markets and generates 70% of the revenue through them.
Here’s what Hazelton Capital Partners said about Micron Technology, Inc. (NASDAQ:MU) in its Q3 2021 investor letter.
“It’s hard to explain how shares of Micron Technology, manufacture of DRAM and NAND semiconductor chips, can fall during a global chip shortage. In most industries, focusing on demand can give you a clear insight into what lays ahead for a company. Today, the memory and storage chip industry is no different. However, in the past, companies focused on market share led to the reckless build out of chip fabrication plants (FABs), oversupply, falling average selling prices (ASPs) of memory and storage chips, lower margins, and declining cash flows. As the industry consolidated – there are now just 3 major producers of DRAM and 5 on the NAND side – rational behavior among the key players began to take hold as competitors began focusing more on R&D. Currently, chip pricing remains cyclical although less so than in the past and that cyclicality has a long-term upward bias. The ongoing transition to newer and more robust platforms (3D 176-layer NAND & 1-Alpha node DRAM) has provided the memory and storage chip industry with improved supply capacity under its current manufacturing footprint, ultimately pressuring ASPs. Over the past three years, as most of the large platform conversions have already taken place, being able to add more bits per wafer has reached a saturation point. With no major FAB build outs planned in the near-term by competitors Samsung or SK Hynix, constrained supply and flattening cost curves should lead to durable and upward sloping ASPs once the recent volatility from the chip shortage subsides.
Currently Micron Technology trades at just 8x 2022 estimate earnings. MU is expecting growth in both DRAM and NAND not just from the supply of more chips to data centers, artificial intelligence, the auto sector, and mobile devices, but also from greater demand for gigabyte capacity per unit within those segments. With a healthy balance sheet, improving return on invested capital, and expanding cash flows, not only should Micron benefit from improving future earnings but its multiple should also reflect the transition to a flattening cost curve.”
Micron Technology, Inc. (NASDAQ:MU) was held by 78 hedge funds as of Q1 2022.
Along with Micron Technology, Inc. (NASDAQ:MU), some of the notable movers in the tech sector on Friday are CrowdStrike Holdings, Inc. (NASDAQ:CRWD), Meta Platforms, Inc. (NASDAQ:FB), and Airbnb, Inc. (NASDAQ:ABNB).
5. CrowdStrike Holdings, Inc. (NASDAQ:CRWD) has fallen 6.44% as of 12:29 PM ET after Brad Reback at Stifel lowered the price target on CrowdStrike Holdings, Inc. (NASDAQ:CRWD) from $250 to $205, reflecting a decrease of 18%. Even though the analyst believes that CrowdStrike Holdings, Inc. (NASDAQ:CRWD) reported “solid” Q1 results, he expects the stock’s high valuation to decline. Reback shared that his price target is reflective of “recent multiple compression.”
Baron Funds shared its insights on CrowdStrike Holdings, Inc. (NASDAQ:CRWD) in its Q1 2022 investor letter. Here’s what was said about the company:
“CrowdStrike, Inc. provides cloud-delivered, next generation security solutions via its Falcon platform consisting of end-point protection, advanced persistent threat, security information, event management, and cloud workload protection. Shares rose 11% in the first quarter, on the back of impressive quarterly results with net new annual recurring revenue (ARR) accelerating for the second straight quarter to 52% year-over-year and the company’s favorable unit economics driving 30% free cash flow margins. Moreover, key new disclosures highlight how non-end-point products are seeing momentum with cloud product-generated ARR surpassing $100 million, representing 8% of net new ARR in the quarter. With more workloads migrating to or starting in the cloud, we believe CrowdStrike is well positioned to compound at high growth rates for years given its unique product platform and attractive go-to-market business model.”
CrowdStrike Holdings, Inc. (NASDAQ:CRWD) was held by 80 hedge funds out of the 912 funds being tracked by Insider Monkey as of Q1 2022.
4. Okta, Inc. (NASDAQ:OKTA) has gained 7.69% as of 12:30 PM ET after the San Francisco, California-based identity and access management company increased its guidance for Q2 2022 and the rest of the year. The analysts appreciated the Q1 results and highlighted that Okta, Inc. (NASDAQ:OKTA) has recovered from the data breach that took earlier this year. Following the results, Rudy Kessinger at DA Davidson increased the price target on Okta, Inc. (NASDAQ:OKTA) from $125 to $140 and maintained a Buy rating on the stock. The analyst highlighted that the data breach had a short-term financial impact on Okta, Inc. (NASDAQ:OKTA).
Okta, Inc. (NASDAQ:OKTA) was discussed in the Q2 2021 investor letter of Lakehouse Capital. Here’s what the investment management firm said:
“The Fund held 20 positions as of the end of June and exited four during the year (including) Okta. The companies we exited were sold almost entirely on the basis of their valuations getting stretched well past their norms and to levels where the return profile no longer offered the asymmetric upside that led us to invest in the first place. We dislike selling on valuation as great growth companies are hard to find and letting winners run is an important facet of a winning growth strategy, however, we’re not gluttons for punishment either and in each of those cases we redeployed capital towards other high-quality growth companies with less demanding valuations.”
Okta, Inc. (NASDAQ:OKTA) was held by 46 hedge funds as of Q1 2022.
3. Snowflake Inc. (NYSE:SNOW) has gained 0.05% as of 10:01 AM ET after Simon Leopold at Raymond James initiated coverage on the Bozeman, Montana-based data warehousing company. The analyst gave Snowflake Inc. (NYSE:SNOW) stock an Outperform rating with a price target of $184. In a research note issued to investors earlier today, the analyst highlighted that the company’s cloud-based data warehousing business could compete against cloud-agnostic and public cloud operators because of its uniqueness and differentiation. Leopold expects Snowflake Inc. (NYSE:SNOW) to gain share in the massive market and ever-increasing total addressable market (TAM). The analyst expects the top line to grow by 50% annually for the next three years.
In its Q1 2022 investor letter, Snowflake Inc. (NYSE:SNOW) was mentioned by Baron Funds. Here’s what the asset management firm said:
“Snowflake grew revenues…106% (to $1.2 billion — while new bookings in the fourth quarter alone were $1.2 billion in contract value) with 12% margins. The stock was down 32% in the first quarter. We believe that these companies, along with many others that we own, are the long-term beneficiaries of digital transformation, a multi-decade paradigm shift sweeping global economies today. Frank Slootman, Snowflake’s CEO, explained it this way in his most recent earnings call with investors:
“Snowflake’s growth is driven by digital transformation and long-term secular trends in data science and analytics, enabled by cloud-scale computing and Snowflake’s cloud-native architecture. Snowflake is a single data operations platform that addresses a broad spectrum of workload types and incredible performance economy and governance. As a platform, Snowflake enables the data cloud, a world without silos and the promise of unfettered data science.”
In plain English it means that we want to make better decisions and we have all this data available to us. Snowflake will enable businesses to utilize all their data to improve their decision-making.
Snowflake Inc. provides a data platform for large-scale data analytics. Shares fell 32% during the first quarter despite reporting strong results, finishing 2021 with 106% year-over-year revenue growth, while booking $1.2 billion of new business in the fourth quarter alone. Shares declined due to the rotation out of fast-growing long-duration stocks as well as concerns over the company’s newly introduced infrastructure improvements, which make customers more efficient in using the Snowflake platform (lowering cost on a per usage basis). While some investors viewed that negatively due to the near-term impact on usage-based revenues, we see this as a positive development, since putting customers first tends to create a lot of value over the long term. We believe that by reducing costs to customers, they will migrate more workloads to Snowflake, making the company better positioned to capture a bigger portion of its large market opportunity and extending its technology leadership over competitors. We remain excited about Snowflake’s best-in-class growth at scale with favorable unit economics, addressing one of the largest opportunities in technology.”
Overall, 81 hedge funds held a stake in Snowflake Inc. (NYSE:SNOW) as of Q1 2022.
2. Meta Platforms, Inc. (NASDAQ:FB) has slumped 3.54% as of 12:31 PM ET following Sheryl Sandberg’s decision to step down as the company’s Chief Operating Officer (COO). She has been associated with Meta Platforms, Inc. (NASDAQ:FB) for the past 14 years and will leave the day-to-day operations in the fall of this year. Sandberg will be replaced by Chief Growth Officer (CGO), Javier Olivan. Mr. Olivan will take over a wide range of responsibilities at a time when the core ad business is under pressure due to broad macroeconomic uncertainty and privacy changes by Apple Inc. (NASDAQ:AAPL).
Here’s what Giverny Capital said about Meta Platforms, Inc. (NASDAQ:FB) in its Q1 2022 investor letter:
“If there is any good news, I don’t believe this group suffered material impairments to their long-term earnings trajectory. Rather, relatively small earnings misses or reductions to short-term guidance led to large stock declines. I added to several of these positions during the quarter.
However, our holding Meta Platforms, the detested social media business formerly known as Facebook, deserves some attention. It suffered an earnings miss in the fourth quarter of 2021 and provided sobering future guidance. While this qualifies as disappointing news, I think the market reaction was more of a primal scream than a considered response.
As a person who manages other people’s money for a living, I can tell you with confidence that clients don’t like Meta. A few of you won’t own it, restricting me from buying it for you. Others defer to me,
grudgingly. There is no other security in our portfolio like this. When a company is so widely disliked, the main reason to hold it is because it is “working,” to use the horrible Wall Street parlance. In other words, your manager owns it because it keeps going up. Once it stops going up, professional money managers happily accept the chance to sell it. No more cranky calls from clients questioning their ethical compass.The rub, however, is that despite the bad earnings news the economics of Meta’s social media businesses remain exceptionally good. In 2021, for every dollar of revenue generated Meta spent 63 cents on expenses and reported 37 cents of pretax profit. That was considered disappointing, even though very few businesses generate 37% profit margins. On top of that, fully one-third of expenses, or 21 cents on the dollar of revenue, is spent on research & development, which is investment in future growth. In Meta’s case, this amounts to about $25 billion a year invested in various new projects, the most important of which is the metaverse. R&D is not completely discretionary as companies have to invest in innovation or stagnate. But management certainly has flexibility as to the pace of spending…” (Click here to see the full text)
Of the 912 hedge funds in Insider Monkey’s database, 200 funds held a stake in Meta Platforms, Inc. (NASDAQ:FB) as of Q1 2022.
1. Airbnb, Inc. (NASDAQ:ABNB) has slid 1.81% as of 12:33 AM ET after Naved Khan at Truist lowered the price target on Airbnb, Inc. (NASDAQ:ABNB) from $190 to $160 while maintaining a Hold rating on the stock. The analyst anticipates a strong recovery in travel demand in the short term but sees sensitivity to inflationary prices amongst travelers.
Tollymore Investment Partners shared its stance on Airbnb, Inc. (NASDAQ:ABNB) in its Q3 2021 investor letter. Here’s what the firm said:
“Today disruptors are not typically seeking to replace incumbents entirely. Rather, they break the links in the customer journey, in doing so better aligning monetisation with value creation and minimising externalities. For example, Airbnb broke the link between staying in residential property and owning it. Airbnb is a specific example of a business model innovation which separated asset use from ownership. This is hardly a novel idea; it’s called renting. Rental models lend themselves to assets which are expensive and durable, and where usage is infrequent.”
Airbnb, Inc. (NASDAQ:ABNB) was held by 66 hedge funds as of Q1 2022.
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Disclose. None. 10 Tech Stocks Making Headlines on Friday is originally published on Insider Monkey.
