The NASDAQ 100, which tracks the 100 largest companies listed on the tech-heavy NASDAQ Composite, has gotten off to one of its worst starts to a year ever. Falling 8% so far in 2022, the Federal Reserve’s plans to raise interest rates sparked an exodus in high-growth technology stocks with frothy valuations.
Despite the recent turmoil, here are three fast-growing tech companies that have been attempting to bounce back from their recent selloff. All three are scheduled to release their latest financial results later this month.
1. Block
- Year-To-Date Performance: -21%
- Percentage From ATH: -55.9%
- Market Cap: $73.8 Billion
Shares of Square-parent Block (NYSE:SQ), the mobile payment specialist run by former Twitter CEO Jack Dorsey, were one of the big winners of the COVID pandemic as the accelerated shift to e-commerce fueled strong growth across its Cash App ecosystem.
However, the digital payment provider, which changed its corporate name to Block late last year, has seen its stock endure some turbulence lately amid the selloff in high-growth tech companies. Year-to-date, Block shares have lost 21%, significantly underperforming the broader market since the start of 2022.
SQ—which is about 56% below its all-time high of $289.20 reached on Aug. 5—ended Tuesday’s session at $127.61, earning the San Francisco, California-based financial-technology company a market value of $73.8 billion.
Block posted disappointing Q3 profit and sales in early November. It is scheduled to report fourth quarter financial results after the U.S. market closes on Thursday, Feb. 24.
Consensus calls for earnings per share of $0.23, falling 28% from the year-ago period due mostly to the impact of its recent $29 billion acquisition of buy-now-pay-later (BNPL) firm Afterpay. Revenue is expected to climb 30% Y-o-Y to $4.09 billion, benefitting from a strong performance in its Cash App mobile payment service.
Investors will pay close attention to growth in gross payment volume (GPV)—the value of all transactions processed on the fintech company’s platform. The key metric jumped 43% Y-o-Y to $45.4 billion in the last quarter.
Considering the Square-owner’s leading position in the mobile payment processing industry, Block could finally see shares bottom following a brutal selloff which has seen it lose nearly half its market value over the past three months.
Not surprisingly, 29 out of 42 analysts surveyed by Investing.com rate SQ stock as “outperform,” implying a whopping 95% upside from current levels to $248.84/share.
Chart: Investing.com
2. Cloudflare
- Year-To-Date Performance: -22.1%
- Percentage From ATH: -53.8%
- Market Cap: $32.9 Billion
With investors increasingly turning away from tech companies with extremely high valuations, shares of Cloudflare (NYSE:NET) have struggled mightily in recent months. After scoring sizable gains of 345% and 73% respectively during the COVID outbreak in 2020 and 2021, Cloudflare—which provides web security and infrastructure services—has seen its stock decline about 22% year-to-date.
NET is almost 54% below its record peak of $221.64 touched on Nov. 18. At the end of yesterday’s session, NET slipped to $102.43. At current valuations, the San Francisco, California-based cloud-based networking and cybersecurity services provider's market cap is $32.9 billion.
Cloudflare's Q3 sales shattered their previous record, with upbeat guidance provided moving forward. Investors will find out on Thursday, Feb. 10 after the closing bell, if the company was able to keep to its upward trajectory, since analyst estimates are calling for the cloud networking and security solution provider to deliver breakeven earnings per share, improving from a loss of $0.02 per share in the year-ago period.
Revenue is expected to increase 47% Y-o-Y to $185.1 million, reflecting robust demand for its web security, content delivery, and enterprise networking services and solutions.
Beyond the top-and-bottom line numbers, investors will focus on Cloudflare’s large customer count to see if it can keep up its torrid pace of growth. The network security firm said the number of clients that spend at least $100,000 annually jumped 71% Y-o-Y to 1,260 in Q3.
In our view, shares of the once high-flying growth darling seem poised to take off again in the weeks and months ahead given the strong demand for its products and services amid the current environment.
Indeed, 12 out of the 24 analysts surveyed by Investing.com are optimistic on NET stock, forecasting upside of 66% from current prices to $170.71/share. Just one analyst surveyed has a ‘sell’ rating on the name.
Chart: Investing.com
3. Palantir Technologies
- Year-To-Date Performance: -22%
- Percentage From ATH: -68.4%
- Market Cap: $28.4 Billion
Palantir Technologies (NYSE:PLTR), which provides data-analytics software and services to government agencies and large corporations, has suffered a tumultuous year as the former market darling fell out of favor with investors. Shares of the analytics software provider have lost 22% so far this year amid an aggressive reset in valuations across the tech space.
PLTR ended yesterday’s session at $14.20, roughly 68% below its all-time high of $45.00 touched in January 2021. At current levels, the Peter Thiel-founded Denver, Colorado-based data-mining company has a market cap of $28.4 billion.
Palantir has topped estimates for earnings and sales in every quarter since going public in September 2020. It is scheduled to report fourth quarter results ahead of the opening bell on Tuesday, Feb. 15. Consensus estimates call for earnings per share of $0.03, declining 50% from EPS of $0.06 in the year-ago period. Revenue is expected to rise approximately 30% Y-o-Y to $417.6 million, benefitting from robust demand for its data-analytics software tools from government agencies around the world.
As such, investors will stay laser-focused on growth in Palantir’s core government business, which accounts for more than half of the enterprise software company’s total sales. The segment saw Q3 sales rise 34% from a year earlier to $218 million.
U.S. commercial revenue and total commercial customer count, which surged 103% and 46% respectively in the last quarter, will also be of interest, as the big-data firm seeks to diversify its customer base. With 203 customers, Palantir aims to expand into various other sectors, such as health care, energy, and manufacturing.
We believe that the sizable decline in Palantir’s stock, which has seen its market cap shrink by almost two-thirds, has created a buying opportunity in the beaten-down name, given its solid outlook for accelerated revenue growth due to thriving demand for its data analytics software tools.
According to Investing.com, the average PLTR stock analyst price target is around $24, representing 66% upside from current levels over the next 12 months.
Chart: Investing.com