In this article, we discuss the 5 tech stocks to avoid as inflation heats up. If you want to read about some tech stocks to avoid amid rising inflation, go directly to 10 Tech Stocks to Avoid As Inflation Heats Up.
5. Coinbase Global, Inc. (NASDAQ:COIN)
Number of Hedge Fund Holders: 29
Loss in Share Price Year-to-Date as of September 21: 72%
Coinbase Global, Inc. (NASDAQ:COIN) provides financial infrastructure and technology for the crypto economy. On September 19, the company announced that it would be updating the fee structure on the platform to represent changes in global crypto trading volumes and prices. The firm said it would lower the monthly trading volume required to qualify for the mid and upper tiers of our fee schedule by late September. The move comes as the firm struggles to cope with the impact of falling crypto prices.
On September 14, investment advisory JPMorgan maintained a Neutral rating on Coinbase Global, Inc. (NASDAQ:COIN) stock and raised the price target to $78 from $64. Analyst Kenneth Worthington issued the ratings update.
At the end of the second quarter of 2022, 29 hedge funds in the database of Insider Monkey held stakes worth $1.2 billion in Coinbase Global, Inc. (NASDAQ:COIN), compared to 46 in the preceding quarter worth $2.3 billion.
In its Q2 2022 investor letter, Miller Value Partners, an asset management firm, highlighted a few stocks and Coinbase Global, Inc. (NASDAQ:COIN) was one of them. Here is what the fund said:
“Coinbase Global, Inc. (NASDAQ:COIN) fell during the quarter as the crypto markets continued to suffer. While the company reported disappointing results, it committed to capping EBITDA losses at $500M even in the event of “a prolonged market downturn”. COIN’s ample liquidity ($6b in cash on hand) should enable them to survive a prolonged “crypto winter” and invest to strengthen the business in the downturn. While the crypto market is early in its adoption, Coinbase is focused on building the platform for crypto not only supporting trading, and cold storage, but moving into NFTs, staking, and crypto derivatives. We see tremendous upside potential for COIN over the next decade if they are able to successfully execute on their platform strategy.”
4. Peloton Interactive, Inc. (NASDAQ:PTON)
Number of Hedge Fund Holders: 39
Loss in Share Price Year-to-Date as of September 21: 72%
Peloton Interactive, Inc. (NASDAQ:PTON) operates interactive fitness platforms in North America and internationally. On September 20, the firm made a formal unveiling of the Peloton Row product. The release marks the anticipated entry by the company into the rowing category. Peloton Row will list with a starting price of $3,195. This price includes delivery and set-up. Pre-orders in the US have started already and the company expects deliveries in this regard to begin in December.
On September 2, UBS analyst Arpine Kocharyan maintained a Sell rating on Peloton Interactive, Inc. (NASDAQ:PTON) stock and lowered the price target to $8 from $13, identifying the lower sales and continued subdued profitability outlook of the firm as some of the reasons behind the bearish outlook.
At the end of the second quarter of 2022, 39 hedge funds in the database of Insider Monkey held stakes worth $338 million in Peloton Interactive, Inc. (NASDAQ:PTON), compared to 44 in the preceding quarter worth $723.6 million.
In its Q2 2022 investor letter, Rowan Street Capital, an asset management firm, highlighted a few stocks and Peloton Interactive, Inc. (NASDAQ:PTON) was one of them. Here is what the fund said:
“Peloton Interactive, Inc. (NASDAQ:PTON) has been a costly mistake for the fund thus far. We started a small position back in September of 2020 and added to it as the stock declined and the price got “cheaper and cheaper”.
We would like to walk you through the rationale why we bought the stock in the first place and why we added to the position. We will give you just a short summary in the main body of the letter, and for those who are interested in a more detailed version, we have included a write-up on Peloton in the Appendix at the end of this letter.
The trial is still out whether we made a mistake on the company, but we definitely made the mistake on the weighting of our position and the price that we originally paid…(read more)
3. Zoom Video Communications, Inc. (NASDAQ:ZM)
Number of Hedge Fund Holders: 44
Loss in Share Price Year-to-Date as of September 21: 58%
Zoom Video Communications, Inc. (NASDAQ:ZM) provides a unified communications platform worldwide. On August 22, the company posted earnings for the second quarter of 2022, reporting earnings per share of $1.05, beating market estimates by $0.12. The revenue over the period was $1.1 billion, up over 7% compared to the revenue over the same period last year and missing analyst estimates by $20 million. The firm said the total revenue for 2022 was expected to be between $1.095 billion and $1.100 billion, versus estimates of $1.15 billion.
On September 12, KeyBanc analyst Thomas Blakey initiated coverage of Zoom Video Communications, Inc. (NASDAQ:ZM) stock with a Sector Weight rating and no price target, noting the firm was well-positioned to gain share in the phone space.
At the end of the second quarter of 2022, 44 hedge funds in the database of Insider Monkey held stakes worth $2.96 billion in Zoom Video Communications, Inc. (NASDAQ:ZM), compared to 43 in the previous quarter worth $3.2 billion.
In its Q1 2022 investor letter, Horos Asset Management, an asset management firm, highlighted a few stocks and Zoom Video Communications, Inc. (NASDAQ:ZM) was one of them. Here is what the fund said:
“What about the other asset class that has attracted the most attention from the investment community in recent times? Here we can distinguish three major groups. First, those companies without earnings that had convinced investors of their great future growth prospects, pushing up their valuations to irrational levels. A clear example of this, which we mentioned almost two years ago (see here) is Zoom Video Communications, Inc. (NASDAQ:ZM) (“Zoom”), whose market cap exceeded that of companies such as IBM or came close to that of Cisco Systems. Well, from the time we wrote about this odd situation until today, Zoom shares have collapsed nearly 80%.
Therefore, if interest rates rise (or are expected to rise), company valuations are negatively impacted. This is especially true for those businesses that generate little cash today and the market expects them to generate a lot of cash in the future. Hence the severe losses in companies that promised a lot of cash generation in the future (such as Zoom).”
2. Snowflake Inc. (NYSE:SNOW)
Number of Hedge Fund Holders: 65
Loss in Share Price Year-to-Date as of September 21: 44%
Snowflake Inc. (NYSE:SNOW) provides a cloud-based data platform in the United States and internationally. On August 24, the company posted earnings for the second quarter of 2022, reporting losses per share of $0.70, missing market estimates by $0.12. The revenue over the period was $497 million, up over 82% compared to the revenue over the same period last year and beating analyst estimates by $29 million. The firm said the remaining performance obligations were $2.7 billion at the end of June, representing 78% year-over-year growth.
On September 16, Needham analyst Mike Cikos initiated coverage of Snowflake Inc. (NYSE:SNOW) stock with a Buy rating and a price target of $240, noting the firm had a large growth market and the ability to support multiple use-cases.
Among the hedge funds being tracked by Insider Monkey, Boston-based investment firm Altimeter Capital Management is a leading shareholder in Snowflake Inc. (NYSE:SNOW), with 17 million shares worth more than $2.4 billion.
In its Q2 2022 investor letter, Baron Funds, an asset management firm, highlighted a few stocks and Snowflake Inc. (NYSE:SNOW) was one of them. Here is what the fund said:
“During the quarter, we added to three of our cloud infrastructure positions – Snowflake Inc., Cloudflare, Inc., and Datadog, Inc. While investors are concerned that a weakening macroeconomic environment will be a near term headwind to growth as customers may slow down their cloud expansions, we remain focused on the long term – duration of growth, competitive advantages, and innovative capabilities and are happy to increase our positions at a more attractive price. For example, Snowflake Inc. (NYSE:SNOW), the leading data cloud provider, during its recent user conference, announced several new products, which significantly expand its addressable market…(read more)”
1. Meta Platforms, Inc. (NASDAQ:META)
Number of Hedge Fund Holders: 184
Loss in Share Price Year-to-Date as of September 21: 56%
Meta Platforms Inc. (NASDAQ:META) develops products that enable people to connect and share with friends and family through mobile devices, personal computers, virtual reality headsets, wearables, and in-home devices worldwide. On September 20, the company announced that it was planning to integrate the WhatsApp messaging platform with the business services of Salesforce. The offering is aimed at helping businesses chat directly with their customers in the messaging service directly from Salesforce platforms.
On September 12, Piper Sandler analyst Thomas Champion maintained a Neutral rating on Meta Platforms, Inc. (NASDAQ:META) stock and lowered the price target to $175 from $190, noting that checks indicated app tracking transparency headwinds were significant for the firm.
At the end of the second quarter of 2022, 184 hedge funds in the database of Insider Monkey held stakes worth $18.2 billion in Meta Platforms, Inc. (NASDAQ:META), compared to 200 the preceding quarter worth $19.3 billion.
In its Q2 2022 investor letter, Baron Funds, an asset management firm, highlighted a few stocks and Meta Platforms, Inc. (NASDAQ:META) was one of them. Here is what the fund said:
“Shares of Meta Platforms, Inc. (NASDAQ:META), the owner of Facebook, the world’s largest social network, fell 28.4% during the second quarter due to quarterly results that missed consensus estimates, driven by the impact of Apple’s new privacy changes in its iOS operating system. These changes have made it harder for Facebook to measure the effectiveness of its advertising across its mobile apps.
In the longer term, we expect Facebook to continue utilizing its leadership in mobile to provide global advertisers targeted marketing capabilities at scale, with substantial monetization optionality ahead in newer areas such as Reels (Meta’s competing solution to TikTok) and e-commerce.”
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