Cryptocurrencies have a reputation for both explosive growth and extremely dangerous volatility. In many respects, selling on the US stock market was much more volatile. The decline in Nasdaq does not represent the drawdown seen in individual large and small cap stocks. As an example, PayPal Holdings (NASDAQ: PYPL), Shopify (NASDAQ: SHOP)When Meta platform (NASDAQ: FB) It’s all down from the 52-week high Bitcoin (CRYPTO: BTC) Also Ethereum (Cryptography: ETH).. It shows when to buy each tech stock now and how volatility will affect future investments.
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War play with cash
In just seven months, PayPal’s share price was cut by two-thirds. This has lowered PayPal from the fifth largest market capitalization of US-based financial services companies to the top ten.Looks like the following altcoin Solana Also Cardano It goes without saying that it is a typical large business that leads the industry more than Bitcoin and Ethereum.
PayPal is migrating from a young, fast-growing company to a mature, well-established company with medium or low growth. This gradual change has confused investors about how to price PayPal shares.
PayPal’s growth is slowing, but it is recording consistent revenue and free cash flow (FCF). These are two core fundamentals that are worth owning a company in the long run. In 2016, PayPal earned $ 10.8 billion in revenue, $ 1.4 billion in net income and $ 2.5 billion in FCF. Five years later, in 2021, revenue more than doubled to $ 25.4 billion, net revenue tripled to $ 4.2 billion, and FCF more than doubled to $ 5.4 billion. It’s a good looking practice. The concern is that if you focus on 2021 compared to 2020, it’s an ugly chart.
YCharts PYPL Revenue (Annual) Data
Prior to the post-revenue sale in the fourth quarter of 2021, PayPal’s stock received a premium valuation as it was considered a company capable of increasing annual revenue by more than 20% while increasing net income and free cash flow. I did. However, PayPal was unable to do so in 2021, with revenue growth of less than 20%, net income growth declining, and free cash flow growth of less than 10%.
To make matters worse, PayPal predicts that 2022 new account growth and revenue growth will slow by only 15% to 17%. For this reason, it is not surprising that the market will take some time to evaluate PayPal as a slow-growing company.
From very expensive to ordinary expensive
Shopify posted what was an impressive quarter and record year for most accounts. However, when you think about it later, it is clear that the company’s stock price is higher than itself. Shopify is a classic example of a staggering business with overvalued stock prices.
The heart of the investment is to buy the company at a fair price based on future earnings growth. It’s not Shopify’s fault that people continue to bid on stocks to levels that are barely supportive in terms of growth. Until recently sold out, there were more attractive purchases in e-commerce. United Parcel Service, for example. That means Shopify’s share price has fallen 63% in just three months.
Shopify is still an expensive stock, trading at a price-earnings ratio (P / S) of 13 and a price-earnings ratio (P / E) of about 175. However, it is much cheaper than used. To do. Shopify estimates that it supports 10% of the US e-commerce market in terms of transaction volume. If Shopify continues to grow its share of the e-commerce market and the overall market grows, Shopify may grow to that reputation over time. As a result, risk-tolerant investors can consider opening a starter position on Shopify now.
Metaverse is a high-risk, high-reward gambling.
Formerly known as Facebook, Meta Platforms has significantly reduced its market capitalization in a few months over the combined current values of PayPal and Shopify. Companies that once valued more than $ 1 trillion are now worth $ 550 billion.
As evidenced by the name change, Meta Platforms is making image changes to invest billions of dollars in virtual reality, substitute reality, and other means to become more and more successful in the virtual world. increase. The metaplatform is threatened by Web3, the idea of transferring ownership of information and the Internet from sovereign states and businesses to individuals. This is an empowering suggestion, but it’s also terrible for Meta’s business, which relies on data and advertising.
The decentralized Internet can mean that companies like Facebook have less control over information, which is essential for identifying the demographics and behaviors advertisers are looking for. By investing in the commercialization of the Metaverse, Metaplatform is essentially hedging its business and enabling it to thrive in the Internet age.
The main factor pushing Meta Platforms inventories down is slowing growth. Meta is driving revenue growth of only 3% to 11% in the first quarter of 2022 compared to the first quarter of 2021. Another major factor in lowering stocks is concern over the long-term losses caused by investing in the Metaverse, as represented by the reality of the Metaverse. Labs (previously not disclosed in the income statement).
In 2021, Reality Labs posted an operating loss of $ 10.2 billion, and Meta told investors that R & D spending would only increase from here. For investors who are not interested in the Metaverse, this kind of strategic planning is probably not what they want to participate in. But for those who believe in Mark Zuckerberg and the Metaverse, this could be one of the best times to start stocking Metaplatform-and the company’s price-earnings ratio is around 16. Yes, this is the worst I’ve had for years.
Volatility stays here
Even if you’re not interested in PayPal, Shopify, or Meta Platforms, the harsh reality that all three stocks are as volatile as the major cryptocurrencies can make the market unreasonable in the short term. is showing. In today’s information age, news spreads like wildfires around the world in seconds. Private investors have access to tools that were once reserved for professionals.
As we saw in December 2018 and March 2020, and as we now see, market corrections are happening faster than ever. Even for large, established companies, it may be best to accept that volatility is simply an admission fee for being a long-term investor.
This article represents the opinion of a writer who may disagree with the “official” recommendation position of the Motley Fool Premium Advisory Service. We are miscellaneous! Asking investment papers (even our own) helps us all think critically about investment and make decisions that help us become smarter, happier, and richer. It will help.
