Macroeconomic and geopolitical headwinds have affected the stock market this year. Aggressive interest rate hikes by the Fed have significantly affected high-growth tech stocks.
The tech-heavy Nasdaq Composite has fallen 28.5% year-to-date. Several Internet stocks missed earnings estimates due to macroeconomic challenges. And many of them recently announced layoffs and hiring freezes to cut costs.
Fed Chairman Powell has warned that the final level of interest rates will be higher than expected, leading many economists to believe the economy will be in recession next year. A recession can further affect the profitability of Internet businesses, as businesses reduce advertising spending and consumers avoid discretionary spending.
Against this backdrop, it might make sense to sell Snap Inc.’s fundamentally weak internet stock (INSTANTANEOUS), IAC Inc. (IAC), Zhihu Inc. (ZH) and ContextLogic Inc. (TO WISH).
Snap Inc. (INSTANTANEOUS)
SNAP operates as an international camera company. It features Snapchat, the popular camera app that lets people communicate visually through short videos and images. It provides Spectacles, an eyewear product that connects to Snapchat, and offers advertising products.
For the third fiscal quarter ended September 30, 2022, SNAP’s non-GAAP net income decreased 50.8% year over year to $132.06 million. Its adjusted EBITDA fell 58.3% year-over-year to $72.64 million, while its non-GAAP revenue PES came in at $0.08, representing a 52.9% decline from the prior year quarter.
SNAP’s EPS for the quarter ending December 31, 2022 is expected to decline 45.8% year-over-year to $0.12. Over the past year, the stock has fallen 79.9% to close the last trading session at $11.07.
SNAP’s weak fundamentals are reflected in its POWR Rankings. The stock has an overall rating of D, which is equivalent to a sell in our proprietary rating system. POWR ratings rate stocks on 118 different factors, each with its own weighting.
In category F the Internet industry, it is ranked No. 53 out of 59 stocks. The company has an F rating for growth and a D for momentum, stability, sentiment and quality.
Click here to see SNAP’s rating for value.
IAC inc. (IAC)
IAC operates as a worldwide media and internet company. The company publishes original and engaging digital content in the form of articles, illustrations, videos and images. It also operates a digital marketplace that connects home service professionals to consumers under the Angi Ads, Angi Leads and Angi Services brands.
IAC’s total assets for the third fiscal quarter ended September 30, 2022 decreased 15.1% to $10.44 billion from $12.30 billion for the fiscal year ended December 31, 2021. Its total operating loss rose 288.8% year-over-year to $124.68 million. , while its total operating costs and expenses rose 49.1% year-over-year to $1.42 billion.
Its net loss attributable to IAC shareholders was $63.82 million, compared to a net profit attributable to IAC shareholders of $60.69 million. Additionally, its loss per share was $0.74, compared to EPS of $0.65.
IAC’s EPS for the quarter ending December 31, 2022 is expected to be negative at $0.17. Its revenue for the quarter ending March 31, 2023 is expected to decline 7.1% year-over-year to $1.23 billion. Over the past year, the stock has fallen 64% to close the last trading session at $49.45.
IAC’s bleak outlook is reflected in its POWR ratings. The stock has an overall rating of D, which translates to a sell in our proprietary rating system. It is ranked #45 in the same industry. It has a D rating for growth, momentum and stability.
We also gave IAC ratings for value, sentiment, and quality. Get all the IAC grades here.
Zhihu Inc. (ZH)
Based in Beijing, People’s Republic of China, ZH operates an online content community in China. Its community empowers people to seek inspiration, find solutions, make decisions, and have fun.
For the fiscal second quarter ended June 30, 2022, ZH’s total assets decreased by 13.7% to RMB 7.19 billion ($1.01 billion) from RMB 8.33 billion ($1. $.17 billion) for the year ended December 31, 2021.
The company’s operating loss rose 31.4% year-on-year to RMB460.65 million ($65.04 million). Its adjusted net loss rose 121.5% year-on-year to RMB443.78 million ($62.66 million). Moreover, its net loss per share widened 45.9% from the year-ago quarter to RMB 1.59.
ZH’s loss per share for the three months ended September 30, 2022 is expected to increase 366.7% year-over-year to $0.14. Its revenue for the same quarter is expected to decline 4.7% year-over-year to $122.92 million. Over the past year, the stock has fallen 85.3% to close the last trading session at $1.32.
ZH’s bleak outlook is reflected in his POWR ratings. The company has an overall rating of D, which equates to a sale. In the Internet industry, it is ranked No. 46. Additionally, it has a D rating for growth, momentum, stability, and quality.
Click here to see ZH’s other ratings for value and sentiment.
ContextLogic Inc. (TO WISH)
WISH operates as a worldwide mobile e-commerce company. It operates Wish, an e-commerce platform that connects users with merchants. The company also provides market and logistics services to traders.
WISH’s revenue for the third quarter ended September 30, 2022 decreased 66% year-over-year to $125 million. The company’s net loss increased 93.8% from the prior year period to $124 million. Additionally, its adjusted EBITDA loss increased 216.7% year-over-year to $95 million, while its net loss per share increased 80% year-on-year. previous at $0.18.
Analysts expect WISH’s EPS for the quarter ending December 31, 2022 to remain negative. Its revenue for the quarter ended December 31, 2022 is expected to decline 48% year-over-year to $150.40 million. Over the past year, the stock has fallen 85.3% to close the last trading session at $0.75.
WISH’s bleak outlook is reflected in its POWR ratings. The stock has an overall rating of F, which translates to a strong sell in our proprietary rating system. It is ranked No. 54 in the same industry. It has an F rating for stability and a D for growth and quality.
To view WISH’s other ratings for value, momentum and sentiment, Click here.
SNAP shares were trading at $10.93 per share on Thursday afternoon, down $0.14 (-1.26%). Year-to-date, SNAP is down -76.76%, compared to a -16.26% rise in the benchmark S&P 500 over the same period.
About the Author: Malaika Alphonsus
Malaika’s passion for writing and interest in financial markets led her to pursue a career in investment research. With degrees in economics and psychology, she aims to help investors make informed investment decisions. After…
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