Cleveland Federal Reserve President Loretta Mester sees interest rates rising above 4% before the central bank considers easing them off. Since the Fed intends to keep raising rates to bring inflation down to its target level, the market is expected to remain volatile on recession fears.
A rising rate environment is expected to put significant pressure on the tech industry. The tech-heavy Nasdaq Composite is already down more than 24.5% year-to-date and could keep losing. Moreover, tech companies have been laying off staff to cut costs after delivering weak second-quarter results.
Since the economic turbulence is hurting tech companies significantly, hedge funds have been selling shares of Shopify Inc. (SHOP), Nu Holdings Ltd. (NU), Snap Inc. (SNAP), and Farfetch Limited (FTCH) as these stocks may lose significantly because of their fundamental weakness.
Shopify Inc. (SHOP)
Based in Ottawa, Canada, SHOP provides a cloud-based, multi-channel commerce platform designed for SMBs internationally. The company’s platform enables merchants to manage products and inventory, process orders and payments, ship orders, build customer relationships, leverage analytics and reporting, and access financing.
On July 8, 2022, SHOP completed its acquisition of Deliverr, Inc., a startup company that provides shipping services or fulfillment services to e-commerce merchants on marketplace platforms.
With the addition of Deliverr's world-class software, talent, data, and scale, Shopify Fulfillment Network (SFN) would be able to offer merchants a one-stop shop for their logistics needs, from initial receipt of inventory to smart distribution, through to fast delivery and easy returns.
For its fiscal 2022 second quarter ended June 30, 2022, SHOP’s adjusted net loss came in at $41.77 million, compared to an operating income of $236.80 million in the prior-year period. Its adjusted net loss came in at $38.45 million for the quarter versus a $284.61 million net income in the year-ago period.
SHOP’s net loss per share came in at $0.03, compared to an EPS of $0.22 in the prior-year period. As of June 30, 2022, the company had $3.35 billion in cash and cash equivalents.
SHOP’s EPS is expected to remain negative in fiscal 2022 ending December 31, 2022. It missed Street EPS estimates in three of the trailing four quarters. The company’s EPS is expected to fall at a 69.6% rate per annum over the next five years.
SHOP has lost 77.2% year-to-date and 8.7% over the past week to close the last trading session at $31.36. Hedge funds sold 20.7 million shares of SHOP in the last quarter.
SHOP’s POWR Ratings reflect this bleak outlook. The company's overall F rating translates to a Strong Sell in our proprietary rating system. The POWR Ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.
It has a D grade for Growth, Value, Stability, Sentiment, and Quality. Click here to see the additional ratings for SHOP’s Momentum.
SHOP is ranked #29 of 30 stocks in the F-rated Internet - Services industry.
Nu Holdings Ltd. (NU)
Headquartered in Sao Paulo, Brazil, NU operates as a digital financial services platform and technology company primarily in Brazil, Mexico, and Colombia. The company offers its customers products across the five financial seasons: spending, saving, investing, borrowing, and protecting.
For its fiscal 2022 second quarter ended June 30, 2022, NU’s pre-tax loss increased 276.5% year-over-year to $24.61 million. The company’s net loss came in at $29.85 million for the quarter, representing a 96.1% rise from the prior-year period.
Its loss per share came in at $0.01, down 42.3% from the year-ago period. As of June 30, 2022, the company had $3.70 billion in cash and cash equivalents.
NU’s EPS is expected to remain negative in fiscal 2022 ending December 31, 2022. NU has lost 47.9% year-to-date and 2% over the past week to close the last trading session at $4.89. Hedge funds sold 38.3 million shares of NU in the last quarter.
NU’s weak prospects are reflected in its POWR Ratings. The stock has an overall D rating, which equates to a Sell in our proprietary rating system.
It has an F grade for Value, a D for Stability, and a C for Quality and Sentiment. Click here to see the additional ratings for NU’s Growth and Momentum.
NU is ranked #43 of 48 stocks in the D-rated Consumer Financial Services industry.
Snap Inc. (SNAP)
SNAP is a camera company. It is known for its wide range of stickers, Bitmojis, and filters. It also provides Spectacles, an eyewear product that connects with Snapchat and captures video from a human-eye perspective. It also provides advertising products that include AR and Snap ads.
SNAP’s operating loss for its fiscal 2022 second quarter ended June 30, 2022, increased 108.3% year-over-year to $400.94 million. Its non-GAAP net loss came in at $29.60 million for the quarter versus a non-GAAP net income of $144.15 million in the year-ago period.
Its non-GAAP loss per share came in at $0.02, compared to a $0.10 non-GAAP EPS in the prior-year period. As of June 30, 2022, the company had $2.30 billion in cash and cash equivalents.
The consensus EPS estimate is negative for fiscal 2022 ending December 31, 2022. Its EPS is expected to decline at a 17.4% rate per annum over the next five years.
SNAP has lost 78.7% year-to-date and 10.6% over the past week to close the last trading session at $10.01. Hedge funds sold 21 million shares of SNAP in the last quarter.
SNAP’s weak fundamentals are reflected in its POWR Ratings. The stock has an overall D rating, which equates to a Sell in our proprietary rating system.
SNAP has a D grade for Quality, Growth, Stability, Sentiment, and Momentum. Click here to see additional ratings for SNAP’s Value.
SNAP is ranked #58 of 66 stocks in the F-rated Internet industry.
Farfetch Limited (FTCH)
Headquartered in London, U.K., FTCH provides an online marketplace for luxury fashion goods internationally. It operates through Digital Platform; Brand Platform; and In-Store segments.
It operates Farfetch.com, an online marketplace, and a Farfetch app for retailers and brands. It also offers retailers and brands web design, build, development, and retail distribution solutions.
On August 24, 2022, FTCH, Richemont, a Switzerland-based luxury goods holding company, and Symphony Global, one of the investment vehicles of Mohamed Alabbar, announced to acquire a significant stake in YOOX Net-a-Porter Group S.p.A. (YNAP), an Italian online fashion retailer.
Richemont and FTCH will have put and call options, respectively, for FTCH to acquire the remainder of YNAP. Moreover, through this partnership, Richemont and YNAP will leverage FTCH’s technology platform to advance their Luxury New Retail program.
For its fiscal 2022 second quarter ended June 30, 2022, FTCH’s operating loss increased 11.5% year-over-year to $167.62 million. While its net income decreased 23% year-over-year to $67.67 million, its adjusted loss per share grew 23.5% to $0.21. As of June 30, 2022, the company had $575.57 million in cash and cash equivalents, down 57.8% from the end of fiscal 2021.
FTCH’s EPS is expected to remain negative in fiscal 2022 ending December 31, 2022. The company missed consensus EPS estimates in three of the trailing four quarters. Its EPS is expected to decline at a rate of 105.4% per annum over the next five years.
FTCH has lost 69% year-to-date but gained 8.8% over the past week to close the last trading session at $10.38. Hedge funds sold 23.7 million shares of FTCH in the last quarter.
FTCH’s weak prospects are reflected in its POWR Ratings. The stock has an overall F rating, which equates to a Strong Sell in our proprietary rating system.
It has an F grade for Growth and a D for Value and Stability. Click here to see the additional ratings for FTCH’s Momentum, Quality, and Sentiment.
FTCH is ranked #61 in the F-rated Internet industry.
SHOP shares were trading at $31.80 per share on Wednesday afternoon, up $0.44 (+1.40%). Year-to-date, SHOP has declined -76.91%, versus a -15.67% rise in the benchmark S&P 500 index during the same period.
About the Author: Sweta Vijayan
Sweta is an investment analyst and journalist with a special interest in finding market inefficiencies. She’s passionate about educating investors, so that they may find success in the stock market.
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