The Nasdaq is down less than 1% in September, but several dozen tech stocks have registered double-digit declines this month.
In many cases — particularly among high-flying software and Internet stocks that had seen massive run-ups — these declines have a lot to do with the market taking the froth out of richly-valued names. And in the cases of some companies, such as Domo (DOMO) and BlackBerry (BB) , bad earnings news led shares to plunge.
Nonetheless, some of the declines look excessive. Here’s a quick look at a few names that appear interesting in the wake of recent declines. As always, investors are advised to do their own research before placing an order.
September Decline: 34%
Decline from 52-Week High: 44%
Valuation: Roku’s (ROKU) enterprise value (market cap minus net cash) is equal to about 10 times its expected 2020 platform (software and services) revenue, and about 7.5 times its expected total revenue.
The Bull Case: Earlier this month, I argued that Roku felt richly valued following a huge 2019 run-up. With its stock down over 30% since then, it now looks more compelling, though its multiples remain somewhat high. This is still a company that has posted a string of very strong earnings reports this year, and that saw its active accounts and platform revenue grow 39% and 86%, respectively, in Q2. Roku has done a pretty good to date of fending off competition from deep-pocketed tech giants, and it still has a lot of headroom to both grow its user base and better monetize users via video ads and other revenue streams.
September Decline: 23%
Decline from 52-Week High: 28%
Valuation: Pinterest (PINS) carries an EV equal to 8.6 times expected 2020 revenue.
The Bull Case: Pinterest, like Roku, has been reporting pretty impressive top-line and user metrics. The image-sharing platform saw its revenue and monthly active users (MAUs) respectively rise 62% and 30% annually in Q2, with both growth rates accelerating relative to Q1. Also like Roku, Pinterest, whose platform lends itself well to e-commerce advertising, still has a lot of headroom to better monetize its user base. This especially holds for international users, which currently account for more than 70% of Pinterest’s user base, but less than 10% of its revenue.
September Decline: 22%
Decline from 52-Week High: 59%
Valuation: Fiverr (FVRR) has an EV equal to 2.6 times its expected 2020 revenue.
The Bull Case: Fiverr is a play on the proverbial “gig economy.” The company runs a marketplace that connects freelancers with potential employers, and takes a cut on transactions that occur on its platform. Its revenue was up 41% annually in Q2, with the help of a 14% increase in active buyers (employers) and a 16% increase in spend per buyer. With an EV that’s just a little above $400 million, it wouldn’t be shocking to see Fiverr draw buyout interest in time from a larger Internet company or perhaps a private equity firm.
Get an email alert each time I write an article for Real Money. Click the “+Follow” next to my byline to this article.