In this article, we will look at the 5 stocks that can crash after the Federal Reserve’s latest rate hike. If you want to explore similar stocks, you can also take a look at These 10 Stocks Can Crash After Federal Reserve’s Latest Rate Hike.
5. Extreme Networks, Inc. (NASDAQ:EXTR)
Debt-to-Equity Ratio: 3.36
Number of Hedge Fund Holders: 20
Extreme Networks, Inc. (NASDAQ:EXTR) is a network equipment manufacturer. The company develops and manufactures wired and wireless network infrastructure equipment, as well as software for network management. Though the stock is currently risky, On September 13, WestPark Capital initiated coverage of Extreme Networks, Inc. (NASDAQ:EXTR) with a Buy rating and a $20 price target.
On July 27, Extreme Networks, Inc. (NASDAQ:EXTR) announced earnings for the fiscal second quarter of 2022. According to the company’s balance sheet, Extreme Networks, Inc. (NASDAQ:EXTR) has total debt of $351 million, which brings its debt-to-equity ratio to 3.36. The company’s trailing twelve-month operating margins sit at 6.56%. Higher interest rates can strain the company’s cash flows and profits. As of September 19, Extreme Networks, Inc. (NASDAQ:EXTR) has lost 16% of its value year to date and can crash further if the Fed hikes interest rates.
At the close of Q2 2022, 20 hedge funds were bullish on Extreme Networks, Inc. (NASDAQ:EXTR). The collective stakes of these hedge funds amounted to $82.7 million. This is compared to 18 positions in the previous quarter with stakes worth $105.6 million.
As of June 30, Voss Capital owns 3.1 million shares of Extreme Networks, Inc. (NASDAQ:EXTR) and is the largest investor in the company. The investment covers 8.96% of Voss Capital’s 13F portfolio.
Here is what Voss Capital had to say about Extreme Networks, Inc. (NASDAQ:EXTR) in its second-quarter 2022 investor letter:
“EXTR is now the Voss Value Fund’s third largest position at 10% of the portfolio (behind GFF and SWIR). EXTR is a leader in wireless and wired networking equipment (switches, access points, routers), particularly in large scale, complex wi-fi deployments such as hospitals and sprawling university campuses. The Fund has owned EXTR since the middle of 2020 and have previously shared our research on it publicly (see the Voss Q3 2020 Quarterly Letter).
At the start of 2020, the company had a >3.0x net leverage ratio and new product orders briefly collapsed around the Covid-related shutdowns. Fast forward to today and leverage is under 1.0x and the shares are even cheaper at 7.5x our next twelve months’ free cash flow estimate (as of the middle of July), despite their product order backlog being well over 10x what is historically normal. In other words, right as its valuation hits a historic low on a free cash flow basis, we believe the company’s visibility has never been higher…” (Click here to see the full text)
4. Expedia Group, Inc. (NASDAQ:EXPE)
Debt-to-Equity Ratio: 3.52
Number of Hedge Fund Holders: 80
Expedia Group, Inc. (NASDAQ:EXPE) is an online travel shopping company. The company provides reservation services for travelers such as flights, hotels, and rental cars, among others. Expedia Group, Inc. (NASDAQ:EXPE) is an industry leader, but its profits can tank as the Fed tightens and consumers cut down on their discretionary spending.
Expedia Group, Inc. (NASDAQ:EXPE) released its second-quarter 2022 balance sheet on August 4. The company’s total debt currently sits at $7.06 billion, and its debt-to-equity ratio is estimated to be 3.52. The company has trailing twelve-month cash flows of roughly $3 billion, but high interest rates can drain these cash flows and make the stock suffer. As of September 19, Expedia Group, Inc. (NASDAQ:EXPE) has crashed 44% year to date.
On September 12, DA Davidson analyst Tom White slashed his price target on Expedia Group, Inc. (NASDAQ:EXPE) to $122 from $195 and maintained a Neutral rating on the shares. White sees macroeconomic headwinds and inflation impacting the stock as consumers cut their travel spending into 2023.
Insider Monkey found 80 hedge funds long Expedia Group, Inc. (NASDAQ:EXPE) at the end of Q2 2022. The total stakes of these hedge funds amounted to $3.01 billion, down from $633.7 billion in the previous quarter with 88 positions. The hedge fund sentiment for the stock is negative.
As of June 30, D1 Capital Partners is the largest shareholder in Expedia Group, Inc. (NASDAQ:EXPE) and owns roughly 6 million shares of the company. The investment covers 13.82% of the fund’s 13F portfolio.
Here is what Carillon Tower Advisers had to say about Expedia Group, Inc. (NASDAQ:EXPE) in its second-quarter 2022 investor letter:
“Online travel company Expedia Group, Inc. (NASDAQ:EXPE) underperformed after posting quarterly results that were slightly below market expectations. The company’s results were negatively impacted by the omicron variant early on in the quarter and then later the war in Ukraine. Despite this, positive forward commentary from the company noted a recovery in booking trends that point toward these issues being temporary.”
3. Autodesk, Inc. (NASDAQ:ADSK)
Debt-to-Equity Ratio: 3.55
Number of Hedge Fund Holders: 53
Autodesk, Inc. (NASDAQ:ADSK) is a leading global developer of 3D design, engineering, and entertainment software. On September 16, JPMorgan analyst Stephen Tusa slashed his price target on Autodesk, Inc. (NASDAQ:ADSK) to $203 from $267 and downgraded the stock to Neutral from Overweight. The analyst is bearish on the company due to macroeconomic uncertainty.
Autodesk’s (NASDAQ:ADSK) valuation can suffer if the Fed raises interest rates. According to the company’s second-quarter fiscal 2023 balance sheet, Autodesk, Inc. (NASDAQ:ADSK) has total debt of $3.04 billion and its debt-to-equity ratio is estimated at 3.55. If the Fed continues to tighten, Autodesk’s (NASDAQ:ADSK) cash flows can be strained and the stock can crash. As of September 19, the stock is trading at a PE multiple of 80x and has crashed 30% year to date.
At the close of Q2 2022, 53 hedge funds were bullish on Autodesk, Inc. (NASDAQ:ADSK) and held stakes worth $1.41 billion in the company. This is compared to 50 positions in the previous quarter with stakes worth $1.93 billion.
As of June 30, Impax Asset Management is the most prominent investor in Autodesk, Inc. (NASDAQ:ADSK) with stakes worth $221 million. The investment covers 1.07% of Ian Simm’s 13F portfolio.
2. Bentley Systems, Incorporated (NASDAQ:BSY)
Debt-to-Equity Ratio: 3.68
Number of Hedge Fund Holders: 12
Bentley Systems, Incorporated (NASDAQ:BSY) is a software development company that develops and provides support for computer software used in the design, construction, and operation of infrastructure. Bentley Systems, Incorporated (NASDAQ:BSY) is highly overvalued. As of September 19, the stock is trading at a PE multiple of 100x.
On August 9, Bentley Systems, Incorporated (NASDAQ:BSY) released earnings for the fiscal second quarter of 2022. The company generated a revenue of $268 million and missed expectations by $0.81 million. According to the company’s balance sheet, Bentley Systems, Incorporated (NASDAQ:BSY) has total debt of $1.88 billion, which brings its debt-to-equity ratio to 3.68. As of September 19, the stock has plummeted 31% year to date and can tank further if the Fed makes it harder to access cheap credit.
On August 16, Wolfe Research analyst Gal Munda initiated coverage of Bentley Systems, Incorporated (NASDAQ:BSY) with an Outperform rating and a $48 price target.
On September 14, Gregory Bentley, CEO of Bentley Systems Incorporated (NASDAQ:BSY), disclosed that he sold 0.16 million shares of the company on September 12. The transaction was valued at $6.2 million.
Insider Monkey found 12 hedge funds having stakes in Bentley Systems, Incorporated (NASDAQ:BSY) at the end of Q2 2022. The total value of these stakes amounted to $95 million, up from $92 million a quarter ago with 18 positions.
As of June 30, Durable Capital Partners is the largest shareholder in Bentley Systems, Incorporated (NASDAQ:BSY) and owns more than 2 million shares of the company. The investment covers 0.85% of the fund’s 13F portfolio.
1. Etsy, Inc. (NASDAQ:ETSY)
Debt-to-Equity Ratio: 3.91
Number of Hedge Fund Holders: 29
Etsy, Inc. (NASDAQ:ETSY) operates an e-commerce platform that offers vintage items and craft supplies for consumers. Etsy, Inc. (NASDAQ:ETSY) can suffer in a slowdown due to the discretionary nature of its business. Moreover, according to the company’s second-quarter balance sheet, Etsy, Inc. (NASDAQ:ETSY) has total debt of $2.39 billion and a debt-to-equity ratio of 3.91. If the Fed raises interest rates, Etsy, Inc. (NASDAQ:ETSY) can suffer and its cash flows can be strained.
This September, BofA analyst Curtis Nagle initiated coverage of Etsy, Inc. (NASDAQ:ETSY) with a Neutral rating and a $120 price target. The analyst is cautious about the company’s performance in the near-to-medium term as he sees macroeconomic headwinds and declining consumer demand impacting the shares. As of September 19, the stock has tanked 46% year to date.
At the close of Q2 2022, 29 hedge funds were eager on Etsy, Inc. (NASDAQ:ETSY) and held stakes worth $595.8 million in the company. This is compared to 43 positions in the previous quarter with stakes worth $668.5 million. The hedge fund sentiment for the stock is negative.
As of June 30, Two Sigma Advisors owns more than 1.5 million shares of Etsy, Inc. (NASDAQ:ETSY) and is the leading shareholder in the company. The investment covers 0.32% of Two Sigma Advisors’ 13F portfolio.
Here is what Oakmark Funds had to say about Etsy, Inc. (NASDAQ:ETSY) in its second-quarter 2022 investor letter:
“We became interested in Etsy (NASDAQ:ETSY) when Josh Silverman took over as CEO in 2017. The company had long been recognized as a great marketplace, but prior management was not focused on maximizing shareholder value. In short order, Silverman transformed Etsy from a borderline non-profit into a higher-margin, faster-growing enterprise. The pandemic helped accelerate already strong fundamental business results as millions of new customers were introduced to the platform while stuck at home. But like so many other Covid-19 “winners,” Etsy has since fallen deeply out of favor with investors, which prompted us to take a closer look. Following a 75% decline in its stock price, the company now trades for 3.5x next year’s revenue or just a low double-digit multiple of operating profit using our estimate of normalized margins. We believe this is an attractive price to pay for a unique digital marketplace with a long runway for future growth. Note that our exposure to Etsy is currently established via options.”
You can also take a look at 10 Stocks That Benefit From Interest Rate Hikes and 10 Long-Term Stocks To Buy During Recessions.
