Tech, growth stocks lead Wall Street to lower close as investors focus on interest rates
Macro conditions were already troubling for tech. With inflation at a 40-year high and the Federal Reserve signaling a series of interest rate hikes on the horizon, investors started the year by fleeing growth stocks, sending the Nasdaq in January to its worst month since March 2020, the early days of the pandemic.
The outlook over the past three weeks has gone from bad to substantially worse. Russia’s invasion of Ukraine last month rattled an already fragile stock market, sprinkling geopolitical unrest into the stew of volatility. Oil prices just spiked to their highest in over 13 years, and other commodity prices are on the rise on supply concerns as Russia is a key producer of wheat, palladium and aluminum.
Energy and utilities are the only places in the U.S. where investors are finding comfort. While everything else is getting hit, the highest-growth tech stocks are proving unpalatable to all but the most fervent industry bulls.
“The mood of the market is real foul right now for good reasons,” Snowflake CEO Frank Slootman told CNBC’s “Mad Money” on Wednesday. Shares of the cloud data analytics vendor plunged even though revenue beat estimates and the company gave an upbeat forecast.
Snowflake is more than 50% off its 52-week high reached in November. That makes the company a relative safe haven compared to wide swaths of the tech industry. Numerous stocks have lost at least three-quarters of their value since peaking in late 2021, and some well-known names are down 90% or more.
Byron Deeter, a partner at Bessemer Venture Partners and a cloud evangelist, said the median member in his basket of subscription software stocks is down 53%, and that price-to-sales multiples, on average, have compressed from 25 to below 12.
“This sector has just been pounded and yet the macro trends remain very much intact,” Deeter told CNBC’s “TechCheck” on Monday. “You continue to have these extremely high-quality names but they’re on sale across the board.”
CNBC pulled a list of tech and tech-adjacent companies currently valued at $1 billion or more that have lost at least 75% of their value from their 52-week highs. Here are 10 of the most notable companies.
Discount mobile commerce app Wish has struggled since shortly after its IPO in December 2020. The stock priced at $24 and got as high as $32.85. But it’s now trading at $1.99, and is more than 90% below its intraday 52-week high from almost a year ago.
Wish’s challenges are separate from the broader issues facing tech stocks. Fourth-quarter revenue plummeted 64%, declining for a third straight period. The story has gotten worse each quarter, with the primary problem being that people are abandoning the app.
CEO Vijay Talwar spent part of the company’s earnings call on Tuesday trying to reassure investors.
“These numbers tell me we need fresh thinking to guide us back to the growth that we know is possible,” Talwar said.
Shareholders don’t see things improving anytime soon. The stock sank 16% last week.