In today’s top stories, the tech rout deepens with DoorDash, Lyft and Uber caught up in a selloff that has also dragged down returns for Tiger Global. In an effort to rebound shares, Chinese tech stocks are looking to boost shareholder returns. Meanwhile, Bernstein highlights stocks that could outperform amid rising inflation and Barron’s sees growth in mega-cap funds.
Gig economy stocks slump
DoorDash [DASH] is down 57% year-to-date (through 9 May), while ride-hailing firms Lyft [LYFT] and Uber [UBER] have fallen 56% and 45%, respectively, over the same period, MarketWatch reported. All three companies announced a net loss for Q1 and shed a combined $9.12bn on Monday alone. In an email to employees, Uber CEO Dara Khosrowshahi said: “It’s clear that the market is experiencing a seismic shift and we need to react accordingly.”
Inflation-driven price hikes are expected to have affected BT’s [BT-A.L] revenue when its first-quarter earnings are reported on 11 May. Investors will be paying close attention to whether there’s a read-across from Netflix’s recent subscriber woes and the telecom company’s customers have been cancelling their sports subscriptions. Revenue is expected to be propped up by sales of fibre-enabled products in its Openreach arm.
Tech tumult hurts Tiger Global
It’s been a disastrous year so far for Tiger Global. According to the Financial Times, the growth fund led by Chase Coleman has made a loss of $17.1bn amid the technology stock rout. This is a far greater drawdown than the roughly $7bn lost by Melvin Capital, the high-profile casualty of last year’s meme stock rally, and the $12.1bn hit taken by Bridgewater Associates in 2020.
Shoppers are cutting back on their online spending and this is hurting Shopify [SHOP], which failed to impress investors with its Q1 earnings. The ecommerce giant’s revenue was up 22% for the quarter, down from the 41% rate reported in Q4 2021. Despite announcing a 10-for-1 stock split in April, investors seem to be holding back over concerns about its slowing growth, with the share price falling 75.3% year-to-date.
Chinese tech shareholders rejoice
Amid China’s sluggish growth and waning market sentiment, tech companies are hoping buybacks and dividends will boost shares. Last week, D.com [JD], which has seen its share price fall 27.2% year-to-date, announced a special cash dividend of $2bn to holders of American depository receipts and Hong Kong-listed shares. In March, Alibaba [BABA], which has fallen 28.6% since the start of the year, raised its buyback programme from $15bn to a record $25bn.
Value in mega-cap funds
With the market’s rotation from growth towards value stocks under way, investors would be better to focus on mega-cap companies, according to Barron’s. Mega-caps tend to have significant cash piles to help weather a potential recession, the publication argued. The Vanguard Mega Cap Value ETF [MGV] is down 4.8% year-to-date versus a 16.3% decline for the S&P 500. The ETF’s top holdings include Berkshire Hathaway [BRK-B] and Johnson & Johnson [JNJ].
The power in pricing
When inflation rises, consider companies that have the power to increase prices without losing market share. This is the view of Bernstein analysts led by Ann Larson. In a note to clients seen by CNBC, they identified Walmart [WMT] and Kroger [K] as plays on the grocery theme as food prices soar. Healthcare insurance specialists UnitedHealth Group [UNH] and Centene [CNC] are also on their watchlist.
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