In this article, we discuss 5 rebounding tech stocks to watch. If you want to see more stocks in this list, click “Silliness is Back”: Michael Burry’s Latest Comments and 10 Rebounding Tech Stocks to Watch.
5. MercadoLibre, Inc. (NASDAQ:MELI)
Number of Hedge Fund Holders: 63
5-Day Percentage Increase in Share Price as of August 5: 26.98%
MercadoLibre, Inc. (NASDAQ:MELI) offers online commerce platforms in Latin America, operating through Mercado Libre Marketplace, Mercado Pago FinTech, Mercado Fondo, Mercado Envios, Mercado Libre Classifieds, Mercado Libre Ads, and Mercado Shops segments. The stock has shot up about 27% in the last 5 days.
On August 3, the company posted Q2 GAAP EPS of $2.43, beating market estimates by $0.79. MercadoLibre, Inc. (NASDAQ:MELI)’s revenue climbed 52.4% year-over-year to $2.59 billion, outperforming the Wall Street consensus by $80 million. The company’s total payment volume and gross payment volume increased by 83.9% and 26.2% year-over-year, respectively.
Barclays analyst Trevor Young maintained an ‘Overweight’ rating on MercadoLibre, Inc. (NASDAQ:MELI) on August 4 and lowered the price target on the shares to $1,250 from $1,500. The company’s gross merchandise volume in Q2 was approximately in-line and net revenue exceeded consensus across key markets, the analyst told investors in a research note.
According to Insider Monkey’s Q1 data, 63 hedge funds were bullish on MercadoLibre, Inc. (NASDAQ:MELI), compared to 74 funds in the prior quarter. David Blood and Al Gore’s Generation Investment Management is a prominent stakeholder of the company, with 441,529 shares worth $525 million.
Here is what Mercator International Opportunity Fund had to say about MercadoLibre, Inc. (NASDAQ:MELI) in its Q4 2021 investor letter:
“Disruptive technology also tends to create a new breed of portfolio managers. These often younger investors have better insight into the way the world is changing and get on the bandwagon early. Rapid success makes them famous, which allows them to attract huge amounts of money. As these funds grow, new money is added to existing positions. With more money chasing the same fashionable stocks, lofty prices get loftier. The better the performance, the more money flows into the funds and the higher their stocks go.
One day this dynamic inevitably comes to an end. The virtuous cycle suddenly turns vicious. As the popular technology funds get redemptions, their managers are forced to sell. Forced sales bring down stock prices which only results in more redemptions. Fundamentals no longer matter and the baby gets thrown out with the bathwater.
MercadoLibre, Inc. (NASDAQ:MELI; 1.75%) is a good example of how this panic-like behavior creates investment opportunities for level-headed investors. For years, this Latin American eCommerce behemoth was priced for perfection, which they managed to deliver. At the end of last summer, MELI peaked at around $2,000. Then, just like that, with no change in its business prospects, the stock price lost more than 40%. The sentiment changed on a dime. That’s when Mercator began accumulating a position after watching it for many years.”
4. Sea Limited (NYSE:SE)
Number of Hedge Fund Holders: 77
5-Day Percentage Increase in Share Price as of August 5: 14.45%
Sea Limited (NYSE:SE) was incorporated in 2009 and is headquartered in Singapore. The company operates digital entertainment, e-commerce, and digital financial service businesses in Southeast Asia, Latin America, and internationally. On July 26, Citi analyst Alicia Yap maintained a ‘Buy’ rating on Sea Limited (NYSE:SE) but lowered the price target on the shares to $145 from $156 ahead of the Q2 results. Amid global macro crisis, higher interest rates, and a robust U.S dollar against most ASEAN currencies over the last few months, forex headwinds will potentially weigh on the growth for Sea Limited (NYSE:SE)’s dollar-denominated financials, the analyst told investors. The analyst slashed sales estimates to factor in the currency impact and slower consumer sentiment.
According to Insider Monkey’s data, 77 hedge funds were long Sea Limited (NYSE:SE) at the conclusion of the first quarter of 2022, with collective stakes exceeding $5 billion. Chase Coleman’s Tiger Global Management is the leading stakeholder of the company with 13.5 million shares valued at $1.6 billion.
Here is what Baron New Asia Fund had to say about Sea Limited (NYSE:SE) in its Q1 2022 investor letter:
“Sea Limited, a global digital gaming and e-commerce company, detracted from performance for the period held. Similar to other online consumer businesses, Sea faced significant multiple compression in the quarter, exacerbated by a slowdown in user growth at its key Free Fire digital game and mounting investments in its e-commerce operation, particularly in new markets like Brazil. We exited our position as we lost confidence in the long- term unit economics in some of Sea’s new markets and were concerned by the simultaneous slowdown in revenue growth and increase in underlying cash burn.”
3. Block, Inc. (NYSE:SQ)
Number of Hedge Fund Holders: 84
5-Day Percentage Increase in Share Price as of August 5: 19.34%
Block, Inc. (NYSE:SQ) is a California-based company that specializes in financial services and digital payments. The stock has rebounded 19.34% in the last 5 days as of August 5. Block, Inc. (NYSE:SQ) posted its financial results for the second quarter of 2022 on August 4, reporting EPS of $0.18 and revenue of $4.40 billion, outperforming the market’s consensus estimates by $0.02 and $69.5 million, respectively.
On August 5, RBC Capital analyst Daniel Perlin raised the price target on Block, Inc. (NYSE:SQ) to $95 from $91 and maintained an ‘Outperform’ rating on the shares. The analyst cited Block, Inc. (NYSE:SQ)’s Q2 earnings beat and management’s slowing incremental investments, which should support Block, Inc. (NYSE:SQ)’s adjusted EBITDA.
According to Insider Monkey’s data, 84 hedge funds were bullish on Block, Inc. (NYSE:SQ) at the end of Q1 2022, compared to 96 funds in the earlier quarter. ARK Investment Management is the leading shareholder of the company with 8.30 million shares worth $1.12 billion.
Here is what Farrer Wealth Advisors had to say about Block, Inc. (NYSE:SQ) in its Q1 2022 investor letter:
“Block (formerly Square): We ‘adopted’ Block’s stock after the company bought Afterpay, which we were investors in. We had been trimming the Afterpay position throughout 2021 and trimmed again after the acquisition, so the position was quite small. We held onto that small portion, as we did think the acquisition made sense and were excited to see the two companies integrate and for Block to create a closed loop network between merchants and consumers. However, the market punished most highly valued tech stocks over the last months, and we saw the position move against us by over 50%. We are firm believers that when a stock goes against you by 50%+, you need to do something about it. Either trim/sell and reinvest or buy more. In the case of Block, the original reason for holding was to see how the acquisition and integration with Afterpay panned out. The market did not give us the time to see this play out, thus we were not comfortable adding more to the position. Further for the stock to recover to our purchase price, we felt the company’s valuation would need to command a future exit multiple that the market would be unlikely to pay in this environment. Given this, we exited the remainder of the position.”
2. PayPal Holdings, Inc. (NASDAQ:PYPL)
Number of Hedge Fund Holders: 100
5-Day Percentage Increase in Share Price as of August 5: 9.79%
PayPal Holdings, Inc. (NASDAQ:PYPL) is a digital payments technology firm. On August 2, PayPal Holdings, Inc. (NASDAQ:PYPL) released its earnings report for the second quarter of 2022, posting EPS of $0.93 and revenue of $6.81 billion, topping analysts’ predictions by $0.06 and $21.58 million, respectively.
BMO Capital analyst James Fotheringham raised the price target on PayPal Holdings, Inc. (NASDAQ:PYPL) to $124 from $114 on August 4 and reaffirmed an ‘Outperform’ rating on the shares. The analyst is optimistic about PayPal Holdings, Inc. (NASDAQ:PYPL)’s Q2 earnings beat and increased FY22 guidance, while observing that PayPal Holdings, Inc. (NASDAQ:PYPL)’s revenue headwinds from foreign exchange and economic deceleration should be negated by expanding margins and capital return from its new $15 billion share repurchase program.
According to Insider Monkey’s data, 100 hedge funds reported owning stakes in PayPal Holdings, Inc. (NASDAQ:PYPL) as of the conclusion of Q1 2022, compared to 110 funds in the preceding quarter. Ken Fisher’s Fisher Asset Management featured as the leading stakeholder of PayPal Holdings, Inc. (NASDAQ:PYPL), with 16.7 million shares worth $1.94 billion.
Here is what Wedgewood Partners had to say about PayPal Holdings, Inc. (NASDAQ:PYPL) in its Q2 2022 investor letter:
“PayPal Holdings detracted from performance despite the Company generating healthy growth. Revenue grew +8%, but closer to +15% when adjusted for the well-telegraphed roll-off of its eBay relationship. As the Company laps the headwinds of eBay and difficult year ago comparisons, we expect PayPal should drive long-term growth in the mid-teens. Much of this will be driven by further penetration into the Company’s nearly 450 million active users. PayPal’s user base has grown by +50% since the onset of the pandemic so it makes sense for management to focus on driving higher transactions per account and better monetize this historical windfall of users. In our opinion, the shares have discounted away all of PayPal’s pandemic user and revenue gains, so we added to positions during the quarter.”
1. Meta Platforms, Inc. (NASDAQ:META)
Number of Hedge Fund Holders: 200
5-Day Percentage Increase in Share Price as of August 5: 6.27%
Meta Platforms, Inc. (NASDAQ:META) stock has gained over 6% in the last five days, despite the company reporting below consensus Q2 2022 results. On August 4, Meta Platforms, Inc. (NASDAQ:META) reported that it is entering the corporate bond market for the first time, with the company is planning to sell $10 billion of its debt. The company had to make this move since it has faced a massive stock decline in 2022, losing 50% of its value year-to-date.
On July 28, JMP Securities analyst Andrew Boone maintained an ‘Outperform’ rating on Meta Platforms, Inc. (NASDAQ:META) and lowered the price target on the stock to $215 from $240. The company’s Q2 results and guidance reflect a challenging macro environment that is impacting advertiser sentiment, as well as growing foreign exchange headwinds. However, the analyst still sees Meta Platforms, Inc. (NASDAQ:META) as a “must-buy” for advertisers due to its 3 billion daily active users, the analyst told investors. With shares now trading at 14-times expected 2023 GAAP earnings, the risk/reward on Meta Platforms, Inc. (NASDAQ:META) is positive at current levels, the analyst contended.
Among the hedge funds tracked by Insider Monkey, Boykin Curry’s Eagle Capital Management held a significant position in the company, consisting of 7.4 million shares worth $1.65 billion. Overall, 200 hedge funds were bullish on Meta Platforms, Inc. (NASDAQ:META) at the end of Q1 2022, compared to 224 funds in the prior quarter.
Here is what Boyar Value Group had to say about Meta Platforms, Inc. (NASDAQ:META) in its Q4 2021 investor letter:
“Corporate executives can have many different reasons for selling shares (anticipation of tax law changes, philanthropy, diversification, and much more), but the sheer number of billionaire founders who sold shares in 2021 should raise eyebrows and might well be signaling a market top. Bloomberg’s Ben Steverman and Scott Carpenter report not only that Mark Zuckerberg of Meta Platforms Inc. (formerly known as Facebook) sold shares in his company almost every day last year but also that the founders of Google sold ~$3.5 billion worth of stock (the first time either Sergey Brin or Larry Page has sold shares since 2017).”
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