Technology stocks have led the market decline this year, wiping out significant investor wealth. Why is this and which technology stocks have underperformed in the past year? Alphastocks do you want to tell this!
Over the past decade, high-growth technology stocks have generated exponential returns for investors thanks to a low-interest-rate environment, rising global GDP figures and the ongoing pandemic. Now, the macroeconomic environment is exceptionally sluggish due to rising interest rates, inflation, supply chain disruptions and the threat of a recession, which have caused valuations of expensive tech stocks to fall.
While the S&P 500 index is down 19% in 2022, several tech stocks are trading at a massive discount from last year. So let’s take a look at three of the worst performing tech stocks in the S&P 500 right now.
Netflix
Shares of streaming service Netflix are down 70% so far, valuing the company at a market cap of $80 billion. The last time Netflix shares traded at $180 was in September 2017.
As Netflix exited the Russian markets, it lost subscribers for the first time in history, making investors nervous. Netflix competes with major players such as Disney, Apple and Amazon in the streaming segment. These companies can afford to invest (burn) money to acquire customers and expand their user base. Netflix, on the other hand, has to use their free cash flow to generate new content, meaning this money can’t go to shareholders.
While Netflix remains a leader in online streaming, it is now looking to diversify its revenue streams and may consider an ad-based model to increase its market share in emerging markets such as Asia and Latin America.
Due to the steep decline, Netflix is now valued at less than three times expected revenue (price-to-sales) and a price-to-earnings ratio (p/e) of 16.5, which is attractive.
Etsy
Etsy is an online e-commerce company. The company has already fallen by 63.5% in 2022. Etsy became beloved amid COVID-19, when revenue more than doubled to $1.72 billion in 2020. The company grew its revenue by an additional 30% in 2021, but is expected to grow revenue by “just” 8% this year. can grow.
Etsy operates in a niche segment and is part of a booming market. It has a huge inventory of handcrafted products, which should attract new buyers and sellers over time. In addition, the e-commerce market is expected to grow at an annual rate of 14.7% over the next five years. Etsy closed the first quarter with 95.1 million active buyers and 7.7 million active sellers. Unlike other growth stocks that make up the tech sector, Etsy is consistently profitable.
ETSY’s stock is valued at 4x expected revenue and a price-to-earnings ratio of 33x, which is pricey but many times more attractive than it used to be.
Align Technology
The last stock on the list is Align Technology, which fell 62.4% in 2022. Align Technology is a company that specializes in medical devices. It is engaged in the design, manufacture and marketing of dental aligners and other products.
Align Technology’s dental devices cost more than $2,000. That’s quite expensive for the average buyer, especially given rising inflation rates and an uncertain economic environment, which could act as headwinds for the company in the near term. However, Align Technology is a market leader in an industry estimated to grow at an annual rate of 29.5% through 2030.
ALGN’s stock is valued at 4.5x expected revenue and a price-earnings ratio of 24.5x. That’s a lot more attractive than a few months ago!
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