In this article, we discuss the 5 biggest losers of the technology stocks crash. If you want to read our detailed analysis of why these and other tech stocks are struggling right now, go directly to Technology Stocks Crash: 10 Biggest Losers.
5. Sea Limited (NYSE:SE)
Number of Hedge Fund Holders: 108
Percentage Decline in Share Price Over Past Month: 17%
Sea Limited (NYSE:SE) is a diversified technology company that hedge funds have been selling in recent months. At the end of the fourth quarter of 2021, 108 hedge funds in the database of Insider Monkey held stakes worth $10 billion in Sea Limited (NYSE:SE), down from 117 in the previous quarter, when those positions were valued at $14 billion.
On January 27, Goldman Sachs analyst Miang Chuen Koh downgraded Sea Limited (NYSE:SE) to ‘Buy’ from ‘Conviction Buy’ and reduced the firm’s price target on the stock to $300 from $460, noting that the near-term visibility for the firm was challenging.
In its Q4 2020 investor letter, Hayden Capital, an asset management firm, highlighted a few stocks and Sea Limited (NYSE:SE) was one of them. Here is what the fund said:
“Sea Limited (NYSE:SE): When I wrote our Q4 2019 letter about Shopee launching a Brazilian business, it seemed very few investors or competitors knew or cared.
A year ago, I wrote: “This is the first test for the ecommerce marketplace outside of its Southeast Asia home base. Will the platform’s fun and addicting features overcome a lack of local knowledge and presence? It’s hard to predict consumer behavior and how accepting users will be to a platform – especially one that’s a foreign culture and 10,000 miles away. The only way to know is to experiment and watch the results closely.
Empirically though, it seems that what consumers find entertaining in Asia, generally translates well to Brazil (and Shopee really is as much an entertainment platform, as an ecommerce one).
For example, just look at the top 10 free apps in Brazil. Two are utility messaging apps, so we’ll ignore those (WhatsApp and
Facebook Messenger). But among the remaining eight apps, they’re all entertainment based and overwhelmingly Asian. Four are from China (Kwai, TikTok, VStatus, TikTok Lite), two from Singapore (Free Fire and Shopee, both Sea Ltd apps), and one from the US (Instagram). The commonality is that all these apps are experts at creating addictive habits, as evidenced by their personalized recommendations, avg usage time, number of logins per day per user, etc.” (LINK)
I distinctly remember having conversations with several Brazilian hedge funds as recently as last summer who were investors in Sea Limited (NYSE:SE). When the topic of Brazil came up, many of them didn’t even know Shopee was operating in their own backyard!
Part of this stems from the fact that Shopee..”[read the entire letter here]
4. Palantir Technologies Inc. (NYSE:PLTR)
Number of Hedge Fund Holders: 33
Percentage Decline in Share Price Over Past Month: 18%
Palantir Technologies Inc. (NYSE:PLTR) develops software products for the intelligence industry. On February 18, Deutsche Bank analyst Brad Zelnick maintained a ‘Hold’ rating on the shares and lowered his price target on them to $15 from $18, pointing out that the company’s aggressive investment plans to sustain its growth and the firm’s underlying organic trends were a cause for investor concern.
Hedge funds have also been selling Palantir Technologies Inc. (NYSE:PLTR) as the market shifts towards value plays. At the end of the fourth quarter of 2021, 33 hedge funds in the database of Insider Monkey held stakes worth $1.2 billion in Palantir Technologies Inc. (NYSE: PLTR), compared to 35 in the preceding quarter with stakes worth $1.6 billion.
In its Q4 2020 investor letter, asset management firm Guardian Fund highlighted a few stocks and Palantir Technologies Inc. (NYSE:PLTR) was one of them. Here is what the fund said:
“In October, we bought a stake in Palantir. Earlier, in June, our concentrated Tech Fund, which has a mandate to also buy shares in the secondary market, bought shares of Palantir from insiders, before the direct listing. At the price we bought, the equity had much more upside than downside. Palantir is operating a software platform that functions as the digital infrastructure for data-driven operations and decision making. The software helps to structure and capture context in data of large corporations. Governments are increasingly realizing that they have to deal with serious data challenges and cyber risk. As most governments cannot attract the most talented software engineers, they need private enterprises such as Palantir to help them build solid infrastructure. Foundry, Palantir’s software for enterprises, is used by companiesto make safer cars and airplanes or to accelerate cancer research. The speed to bring new clients on board is improving and revenues will grow faster than expenses. Palantir has a long runway of growth ahead.”
3. Shopify Inc. (NYSE:SHOP)
Number of Hedge Fund Holders: 86
Percentage Decline in Share Price Over Past Month: 25%
Shopify Inc. (NYSE:SHOP) is one of the top ecommerce stocks on Wall Street, but that hasn’t saved its shares from losing a quarter of their value over the past month. Among the hedge funds being tracked by Insider Monkey, Connecticut-based investment firm Lone Pine Capital is a leading shareholder in Shopify Inc. (NYSE:SHOP) as of December 31, owning 1.3 million shares worth more than $1.9 billion.
On February 17, Roth Capital analyst Darren Aftahi downgraded Shopify Inc. (NYSE:SHOP) to ‘Neutral’ from ‘Buy’ and lowered the price target on SHOP shares to $850 from $1,400, noting that the company’s plans for international expansion might negatively impact its margins in the near-term.
In its Q4 2020 investor letter, RGA Investment Advisors, an asset management firm, highlighted a few stocks and Shopify Inc. (NYSE:SHOP) was one of them. Here is what the fund said:
“While we are pleased with the results of these specific purchases, we made a huge mistake of omission at that time. This mistake will likely be one of the biggest we ever make in our careers. Specifically, we did deep work on Shopify Inc. (NYSE:SHOP) and loved everything about the business qualitatively. Unfortunately, we ultimately found ourselves unable to get comfortable with the numbers.
We built our model up from the key performance indicators (KPIs) that drive revenues. Our last save of the model dated 8/3/2016 looked as follows: (Page 2). These numbers seemed right from everything we understood about the company. While we tend not to rely on sell-side consensus estimates before finishing our own workup of the business, we do give them a look once we feel comfortable with how we have approached our analysis as it is often helpful to get a sense of what the average participant in the market expects the business to do. With Shopify, the sell-side consensus was so far from where our numbers were shaking out, it seemed almost impossible that we were basing our analysis on the same underlying information. Our natural next step was thus to take the sell-side consensus data and work backwards to figure out the implied expectations on each of the key revenue drivers. Here is what the sell-side consensus looked like as at the time: (Page 2).
Shopify’s actual revenues for 2016-2018 ended up being $389m, $673m and $1,073m. In other words, not only were we justifiably far more optimistic than the consensus estimate, but we also were far too conservative in terms of how the company actually performed.
The nature of our job as securities analysts is to take calculated risks, in an uncertain world where the “true” answer is inherently unknowable before the fact. We operate in what many call an “efficient market” and subscribe to the belief that for the most part, markets are generally pretty efficient and it requires differentiated analysis to find a return above what the market can offer. So why did we pass on Shopify Inc. (NYSE:SHOP) despite 1) deeply believing in the qualitative elements of the business; and, 2) seeing a meaningful gap between what we expected and the consensus expected? The answer is unfortunate but simple: we lacked confidence in ourselves. It was the first time we truly experienced such a stark divergence between our expectation and the consensus and the result was the inclination was to pound ourselves over the head with how dumb we must be, rather than the other way around. We also learned that the truly great companies use their strong business advantages, smart management and execution to raise the bar every step along the way. Obviously this is a cycle which cannot continue ad infinitum, but especially in instances where our qualitative work identifies the inherent strengths in the business and the numbers shake out to be quite fair, the consistent “raising of the bar” can be a potent driver for the stock.
Please do not judge us too harshly for our mistake on Shopify Inc. (NYSE:SHOP), for we have from the very beginning made one commitment above all else to both our clients and ourselves: that we will be better today than we were yesterday, and better tomorrow than we are today. While this mistake was quite costly, it ended up being a key confidence and process builder.”
2. Meta Platforms, Inc. (NASDAQ:FB)
Number of Hedge Fund Holders: 224
Percentage Decline in Share Price Over Past Month: 32%
Meta Platforms, Inc. (NASDAQ:FB) is the parent company of social media giants Facebook and Instagram, and also provides interactive media and other services. On February 8, investment advisory KGI Securities downgraded the stock to ‘Neutral’ from ‘Outperform’ along with a price target of $270. Analyst Freddy Chen issued the ratings update.
There was also a notewrothy hedge fund exodus from Meta Platforms, Inc. (NASDAQ:FB) in Q4. At the end of the fourth quarter of 2021, 224 hedge funds in the database of Insider Monkey held stakes worth $31 billion in Meta Platforms, Inc. (NASDAQ:FB), compared to 248 positions in the preceding quarter worth $38 billion.
In its Q1 2021 investor letter, ClearBridge Investments discussed Meta Platforms, Inc. (NASDAQ:FB), noting that it increased its position in the stock during that quarter. Here is what the fund said:
“We continued to keep our learnings from 2020 in mind during the quarter as we sought to increase the up capture of the portfolio. We also made adjustments to the portfolio’s top 10 holdings to increase the participation of select stocks, including Meta Platforms, Inc. (NASDAQ:FB), while trimming our weighting to stable names, which now represent 47% of the portfolio. Our repositioning has been encouraging so far with the portfolio performing better on up days in the market while maintaining good down capture during more turbulent sessions.”
1. PayPal Holdings, Inc. (NASDAQ:PYPL)
Number of Hedge Fund Holders: 110
Percentage Decline in Share Price Over Past Month: 36%
Topping the list is payments technology company PayPal Holdings, Inc. (NASDAQ:PYPL), shares of which have crashed by 36% over the past month. Several hedge funds timed their exits from the stock well in Q4, as at the end of the fourth quarter of 2021, 110 hedge funds in the database of Insider Monkey held stakes worth $9.9 billion in PayPal Holdings, Inc. (NASDAQ:PYPL). That was down from 123 long positions in the preceding quarter which were worth $12.8 billion.
On February 3, Needham analyst Christopher Brendler lowered the firm’s price target on PayPal Holdings, Inc. (NASDAQ:PYPL) to $166 from $275 but kept a ‘Buy’ rating on the stock, noting the firm was a big pandemic winner but now faced brutal competition highlighted by the loss of eBay, one of its largest customers, in addition to facing broader economic concerns.
In its Q4 2020 investor letter, Polen Capital Management discussed PayPal Holdings, Inc. (NASDAQ:PYPL), having this to say about the company:
“For the full year 2020, one of the top performers was PayPal, which we purchased in 2019, the company continues to take market share in digital payments and has seen an acceleration in user adoption and engagement, especially within their “silver tech” or older user demographic. We expect many more years of ongoing double-digit growth from their various business segments and new initiatives.”
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