Supply chain disruptions and input price inflation are restraining the tech industry’s growth. Furthermore, the sector is reeling under poor investor sentiment due to an expectation of aggressive central bank interest rate hikes this year. Ongoing geopolitical tensions have also fueled declines in the tech-heavy Nasdaq Composite.
Though big tech giants are largely unaffected by the weak market sentiment due to their dominating market positions and robust financials, ultra-popular tech stocks possessing weak fundamentals have been hit hard.
While stable demand for tech solutions is expected to help the sector rebound soon, Shopify Inc. (SHOP), Snowflake Inc. (SNOW), MercadoLibre, Inc. (MELI), DoorDash, Inc. (DASH), and Twilio Inc. (TWLO) could struggle to stay afloat due to their weak financials. So, we think these stocks are best avoided now.
Shopify Inc. (SHOP)
Headquartered in Ottawa, Canada, SHOP, a commerce company, provides a commerce platform and services in Canada, the United States, Europe, the Middle East, Africa, the Asia Pacific, and Latin America.
SHOP’s revenues were $1.38 billion for the fourth quarter, ended Dec. 31, 2021, up 41.1% year-over-year. However, the company’s net loss came in at $371.31 million, compared to $123.87 million in net income in the year-ago period. Its net loss per share was $2.95 compared to EPS of $0.99 in the prior period. Furthermore, its cash and cash equivalents came in at $2.5 billion for the period ended Dec. 31, 2021, compared to $2.7 billion for the period ended December 31, 2020.
SHOP's EPS is expected to decrease 55.8% to $1.25 for the quarter ended June 30, 2022. Over the past year, the stock has declined 45.8% in price to close yesterday’s trading session at $694.26.
SHOP’s POWR Ratings reflect its poor prospects. It has an overall grade of D, which indicates a Sell. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
Also, the stock has an F grade for Growth and a D grade for Value, Stability, and Sentiment. Click here to access the additional POWR Ratings for SHOP (Momentum and Quality). SHOP is ranked last in the F-rated, 34-stock Internet - Services industry.
Snowflake Inc. (SNOW)
SNOW in San Mateo, Calif., provides a cloud-based data platform in the United States and internationally. The company's platform offers Data Cloud, an ecosystem that enables customers to consolidate data into a single source of truth.
SNOW’s revenue came in at $334.44 million for its fiscal 2022 third quarter, ended Oct. 31, 2021, up 109.5% year-over-year. However, its total operating expenses came in at $370.93 million, up 41.4% year-over-year. And its total current liabilities came in at $958.74 million for the period ended Oct. 31, 2021, compared to $789.26 million for the period ended Jan. 31, 2021.
Analysts expect SNOW’s EPS to remain negative in 2022. Over the past three months, the stock has declined 26.7% in price to close yesterday’s trading session at $265.66.
SNOW has an overall D grade, which equates to Sell in our POWR Ratings system. Also, it has an F grade for Value and Stability and a D grade for Quality.
We’ve also rated it for Growth, Momentum, and Sentiment. Click here to access all the SNOW ratings. It is ranked #70 of 81 in the D-rated Technology - Services industry.
Click here to check out our Cloud Computing Industry Report for 2022
MercadoLibre, Inc. (MELI)
Headquartered in Montevideo, Uruguay, MELI operates online commerce platforms in Latin America. It is the largest online commerce ecosystem in Latin America, serving as an integrated regional platform and providing the necessary digital and technology-based tools.
For the fourth quarter, ended Dec. 31, 2021, MELI’s net revenues came in at $2.13 billion, up 60.5% year-over-year. However, its total operating expenses increased 61.4% year-over-year to $829.85 million. The company’s total liabilities came in at $8.57 billion for the period ended Dec. 31, 2021, compared to $4.87 billion for the period ended Dec. 31, 2020.
Over the past year, the stock has declined 31.2% in price to close yesterday’s trading session at $1,126.65.
MELI’s POWR Ratings are consistent with this bleak outlook. The stock has an overall D rating, which equates to a Sell in our proprietary rating system. In addition, the stock has an F grade for Value and a D grade for Stability and Sentiment.
We also have graded MELI for Growth, Momentum, and Quality. Click here to access all MELI’s ratings. It is ranked #45 of 75 stocks in the F-rated Internet industry.
DoorDash, Inc. (DASH)
DASH operates a logistics platform that connects merchants, consumers, and dashers in the United States and internationally. It operates the DoorDash marketplace, which provides an array of services that enable merchants to solve mission-critical challenges. DASH is headquartered in San Francisco.
DASH’s revenue came in at $1.30 billion for the fourth quarter ended Dec. 31, 2021, up 34% year-over-year. However, its total costs and expenses came in at $1.45 billion, up 14% year-over-year. Also, its total current liabilities were $1.76 billion for the period ended Dec. 31, 2021, compared to $1.4 billion for the period ended Dec. 31, 2020.
DASH’s EPS is estimated to remain negative in 2022 and 2023. Its EPS is estimated to fall 20.6% for the quarter ending March 31, 2022. Also, it missed EPS estimates in each of the trailing four quarters. The stock has declined 38.1% over the past year to close yesterday’s session at $104.95.
DASH has an overall D grade, which indicates a Sell. Also, the stock has a D grade for Value, Stability, and Sentiment.
Click here to access the additional POWR Ratings for DASH (Growth, Momentum, and Quality). It is ranked #30 in the Internet - Services industry.
Twilio Inc. (TWLO)
San Francisco-based TWLO, together with its subsidiaries, provides a cloud communications platform that enables developers to build, scale, and operate customer engagement within software applications in the United States and internationally.
TWLO’s revenue was $842.74 million, up 53.8% year-over-year for the fourth quarter, ended Dec. 31, 2021. However, its net loss increased 62.5% year-over-year to $291.4 million, while its loss per share came in at $1.63, up 44.2% year-over-year. Its total liabilities and stockholders’ equity was $13 billion for the period ended Dec. 31, 2021, compared to $9.49 billion for the period ended December 31, 2020.
TWLO’s EPS is expected to remain negative in 2022. Its EPS is expected to decline 76% in 2022. Over the past year, the stock has retreated 55.5% in price to close yesterday’s session at $174.80.
TWLO has an overall D rating, which equates to a Sell in our POWR Ratings system. It has a D grade for Value, Stability, and Quality. Click here to check additional TWLO ratings (Growth, Momentum, and Sentiment). It is ranked #22 of 23 stocks in the F-rated Software - SAAS industry.
Click here to check out our Software Industry Report for 2022
SHOP shares were trading at $686.36 per share on Tuesday morning, down $7.90 (-1.14%). Year-to-date, SHOP has declined -50.17%, versus a -8.16% rise in the benchmark S&P 500 index during the same period.
About the Author: Riddhima Chakraborty
Riddhima is a financial journalist with a passion for analyzing financial instruments. With a master's degree in economics, she helps investors make informed investment decisions through her insightful commentaries.
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