The recent tech earnings season has seen the Nasdaq and the S&P 500 tumble, leaving investors with an opportunity to buy beaten-down tech stocks at discounted prices. In this article, we will analyze three former growth-heavy tech stocks—Shopify (SHOP), Pinterest (PINS), and Block (SQ)—that are trading at least 70% below their highs heading into their Q3 earnings releases. We will explore whether investors should consider buying these stocks and the potential for a rebound.
Market Outlook
The stock market has been volatile recently, with the Nasdaq and the S&P 500 experiencing significant drops. Despite the recent selling pressure, the overall outlook for earnings remains strong, and the Federal Reserve is near the end of its tightening cycle. With the market approaching key support levels, investors might want to consider Warren Buffett’s advice to be greedy when others are fearful.
Pinterest (PINS) – Q3 Earnings Release on Monday, October 30
Pinterest is a highly popular platform with 465 million monthly users worldwide. The company has been focusing on ad tech, video features, and cost-cutting, which have helped transform the firm after a period of breakneck growth. With a Zacks Rank #1 (Strong Buy) and impressive earnings and revenue growth projections, Pinterest presents an interesting investment opportunity.
Key Highlights:
- Pinterest’s ad-friendly platform makes it appealing to advertisers, small businesses, and entrepreneurs.
- Zacks projects a 56% increase in adjusted earnings this year, followed by a 20% increase next year.
- Sales are expected to climb 8% in 2023 and 16% next year.
- Pinterest has a solid balance sheet, but concerns about valuation levels persist.
Shopify (SHOP) – Q3 Earnings Release on Thursday, November 2
Shopify is an e-commerce firm that has thrived as digital commerce becomes increasingly essential. Although the company’s stunning revenue expansion has slowed in recent years, Zacks estimates project a 24% increase in sales this year and an 18% increase next year. Despite its recent decline, Shopify has outperformed the market and offers significant potential for growth.
Key Highlights:
- Shopify benefits from the growing demand for e-commerce and digital payments.
- Adjusted earnings are expected to increase from $0.04 to $0.53 per share this year.
- The stock has shown a strong historical performance, despite recent setbacks.
- Shopify’s valuation levels are a concern for some investors.
Block Inc. (SQ) – Q3 Earnings Release on Thursday, November 2
Block Inc., formerly known as Square, is a financial technology company that aims to become a one-stop shop for digital-native banking and financial services. Despite recent headwinds such as rising interest rates and increased competition, Block has experienced impressive sales expansion. With revenue projected to increase by 22% this year and 12% next year, the company offers an intriguing investment opportunity.
Key Highlights:
- Block provides innovative solutions for consumers and businesses in the fintech space.
- Sales expanded by 86% in 2021 and 102% in 2020, leading to challenging year-over-year comparisons.
- Zacks projects a 69% increase in adjusted earnings this year and a 37% increase next year.
- Block is trading at a low valuation compared to its historical averages and peers.
Conclusion
While the recent tech stock sell-off may have caused concern among investors, it has also created buying opportunities in beaten-down stocks. This article analyzed three such stocks—Shopify, Pinterest, and Block—and highlighted their potential for a rebound. Investors should conduct further research and consider their risk tolerance before making investment decisions.
Disclaimer: The views and opinions expressed in this article are solely those of the author and do not reflect the official policy or position of Nasdaq, Inc.
