In this article, we will discuss some of the notable tech stocks trending on Friday. To take a look at some more stocks that are in the news, go to 5 Tech Stocks Making Headlines on Friday.
Tech stocks in the US are under pressure today after Tesla, Inc. (NASDAQ:TSLA)’s Elon Musk warned of a “super bad feeling” regarding the economy and news of layoffs from several companies kept making headlines. The S&P 500 Index, the Dow 30 Index, and the tech-heavy NASDAQ Composite Index are all down 1.54%, 0.93%, and 2.44%, respectively, as of 12:34 PM ET. Meanwhile, some of the other stocks have declined due to mixed quarterly results and downgrades by analysts. There is also speculation of a significant potential takeover in the tech sector. Stocks such as CrowdStrike Holdings, Inc. (NASDAQ:CRWD), Meta Platforms, Inc. (NASDAQ:FB), and Airbnb, Inc. (NASDAQ:ABNB) are making headlines today.
Let’s look at why these tech stocks are trending today and discuss how hedge funds are positioned in them.
10. Tesla, Inc. (NASDAQ:TSLA) is down 8.06% as of 12:24 PM ET after reports that CEO Elon Musk is looking to reduce the headcount of the Austin, Texas-based electric vehicle company by 10% and also implement a hiring freeze. Musk shared these updates with his executives through an email. He is citing a “super bad feeling” regarding the outlook on the economy as the reason for these cost-cutting actions. This update comes a day after Musk instructed all employees to return to the office physically for at least 40 hours per week or face the possibility of termination.
In its Q1 2022 investor letter, Tesla, Inc. (NASDAQ:TSLA) was mentioned by Baron Funds. Here’s what the asset management firm said:
“During the first quarter, we bought back shares in Tesla, Inc., which designs, manufactures, and sells electric vehicles, solar products, energy storage solutions, and batteries. We believe that despite the run in the stock over the last few years, Tesla presents a favorable risk/reward profile and remains a Big Idea with only about 1% market share of the automotive market. Since we bought the stock during the first quarter, shares increased 27.1%, despite a complex supply-chain environment, on continued revenue growth and record profitability. Robust demand and operational optimization allow the company to offset inflationary pressures while vertical integration provides flexibility around supply bottlenecks. Moreover, we expect new localized manufacturing capacity to drive additional efficiencies while software initiatives, including the autonomous driving program, are accelerating, offering valuable optionality to the stock.”
Tesla, Inc. (NASDAQ:TSLA) was held by 80 hedge funds at the end of Q1 2022. Citadel Investment Group was long over 21 million shares of Tesla, Inc. (NASDAQ:TSLA) during the first quarter of the year.
9. Dropbox, Inc. (NASDAQ:DBX) has risen 6% as of 12:24 PM ET after The Deal.com revealed that the California-based provider of file hosting service might have been approached for a takeover by a consulting firm representing a potential buyer. Dropbox, Inc. (NASDAQ:DBX) has been in the news regarding a potential takeover after activist Elliot Management took a stake in the company nearly a year ago. Rishi Jaluria at RBC Capital thinks that Dropbox, Inc. (NASDAQ:DBX) can be a target for technology giants like Adobe, Inc. (NASDAQ:ADBE) or Salesforce, Inc. (NYSE:CRM).
RGA Investment Advisors LLC shared its stance on Dropbox, Inc. (NASDAQ:DBX) in its Q4 2021 investor letter. Here’s what the firm said:
“Dropbox really let us down this quarter, not because they did anything wrong, but because during our entire tenure holding this stock, it outperformed in periods where long duration assets (aka higher growth) sold off. This time it did not. Despite people asserting this market bifurcation is about selling growth and buying value, Dropbox shares suffered one of their worst stock market quarters in recent years. It’s hard to identify a specific reason, though one story out there is how some investors thought the company could raise the bar on its 30% targeted operating margin upon achieving those levels. Along with the company’s earnings report, instead of raising the bar, they explained how there is more room to drive margin, but in the mean-time the preference at the company is for investing the potential excesses to drive further growth.
This year, the company will have repurchased nearly 9% of its diluted shares outstanding (perhaps more given the Q4 route in shares) and will have delivered a free cash flow yield upwards of 7.5% on its year-end stock price, while growing upwards of 12%. This is a potent recipe for outstanding returns, yet in a market that’s theoretically seeking cash flow, the stock was punished. We think this is one of the most nonsensical moves of them all and find Dropbox to be an especially compelling opportunity heading into 2022. The top line is certainly growing, as the company continues to withstand competition from Microsoft, Google and Box. Plus management continues to make smart tuck-in acquisition, showing what may emerge as a scalable, repeatable recipe for deepening their relationship with existing customers, thus driving down churn and setting the stage for prolonged ARPU growth. This potential strategy started with HelloSign, and is further validated with the acquisition of DocSend…” (Click here to see the full text)
Of the 912 hedge funds in Insider Monkey’s database, 44 funds held a position in Dropbox, Inc. (NASDAQ:DBX) as of Q1 2022.
8. Twitter, Inc. (NASDAQ:TWTR) is 2.36% in the green as of 12:25 PM ET after the waiting period under the Hart-Scott-Rodino (HSR) Act lapsed last night. This means that the $44 billion takeover deal by Elon Musk has been given an all-clear by the Federal Trade Commission (FTC) and the Department of Justice (DoJ). There were speculations that the takeover had gained regulators’ interest due to concerns related to national security as foreign investors were involved in the deal. Following the fake and spam account crisis revealed in Q1 2022 results by Twitter, Inc. (NASDAQ:TWTR), it is understood that Musk will renegotiate the deal at a lower price.
Twitter, Inc. (NASDAQ:TWTR) was held by 68 hedge funds at the end of Q1 2022. Elliott Management was the leading hedge fund investor in Twitter, Inc. (NASDAQ:TWTR) during Q1.
7. Apple Inc. (NASDAQ:AAPL) has plummeted 3.66% as of 12:25 PM ET after Katy Huberty at Morgan Stanley posted a cautionary note about the slow down in net revenue growth of the company’s App Store to 4% YoY during May. The analyst highlighted that as per her estimates, the growth rate was only 8% YoY during April, despite easier comparatives. Huberty also observed that the growth rate is decelerating across all regions in the US. As a result, she sees downside risk for the revenue growth during the current quarter. Huberty has given an Overweight rating on Apple Inc. (NASDAQ:AAPL) stock with a price target of $195.
“Despite these mixed emerging growth results, the ClearBridge Global Growth Strategy outperformed the benchmark due to resilience among our secular and structural growth holdings. The bulk of these contributions came from U.S. mega-cap growth stocks Apple and Microsoft which continued to uniquely act both offensively and defensively as they have through most of the pandemic.”
At the end of Q1 2022, Apple Inc. (NASDAQ:AAPL) was held by 131 hedge funds.
6. Micron Technology, Inc. (NASDAQ:MU) has slipped 7.09% as of 12:27 PM ET after the Boise, Idaho-based memory and storage product manufacturer was downgraded from a Neutral to an Underweight rating by Harsh Kumar at Piper Sandler. The analyst also slashed the price target on Micron Technology, Inc. (NASDAQ:MU) from $90 to $70. Kumar downgraded Micron Technology, Inc. (NASDAQ:MU) stock due to its significant exposure to discretionary consumer electronics products like smartphones, personal computers, and other equipment whose demand is related to the performance of the macro economy. According to the analyst, the company has 55% exposure to these markets and generates 70% of the revenue through them.
Here’s what Hazelton Capital Partners said about Micron Technology, Inc. (NASDAQ:MU) in its Q3 2021 investor letter.
“It’s hard to explain how shares of Micron Technology, manufacture of DRAM and NAND semiconductor chips, can fall during a global chip shortage. In most industries, focusing on demand can give you a clear insight into what lays ahead for a company. Today, the memory and storage chip industry is no different. However, in the past, companies focused on market share led to the reckless build out of chip fabrication plants (FABs), oversupply, falling average selling prices (ASPs) of memory and storage chips, lower margins, and declining cash flows. As the industry consolidated – there are now just 3 major producers of DRAM and 5 on the NAND side – rational behavior among the key players began to take hold as competitors began focusing more on R&D. Currently, chip pricing remains cyclical although less so than in the past and that cyclicality has a long-term upward bias. The ongoing transition to newer and more robust platforms (3D 176-layer NAND & 1-Alpha node DRAM) has provided the memory and storage chip industry with improved supply capacity under its current manufacturing footprint, ultimately pressuring ASPs. Over the past three years, as most of the large platform conversions have already taken place, being able to add more bits per wafer has reached a saturation point. With no major FAB build outs planned in the near-term by competitors Samsung or SK Hynix, constrained supply and flattening cost curves should lead to durable and upward sloping ASPs once the recent volatility from the chip shortage subsides.
Currently Micron Technology trades at just 8x 2022 estimate earnings. MU is expecting growth in both DRAM and NAND not just from the supply of more chips to data centers, artificial intelligence, the auto sector, and mobile devices, but also from greater demand for gigabyte capacity per unit within those segments. With a healthy balance sheet, improving return on invested capital, and expanding cash flows, not only should Micron benefit from improving future earnings but its multiple should also reflect the transition to a flattening cost curve.”
Micron Technology, Inc. (NASDAQ:MU) was held by 78 hedge funds as of Q1 2022.
Along with Micron Technology, Inc. (NASDAQ:MU), some of the notable movers in the tech sector on Friday are CrowdStrike Holdings, Inc. (NASDAQ:CRWD), Meta Platforms, Inc. (NASDAQ:FB), and Airbnb, Inc. (NASDAQ:ABNB).
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Disclose. None. 10 Tech Stocks Making Headlines on Friday is originally published on Insider Monkey.