Although the major stock indices shrugged off concerns over the Evergrande debt crisis, the market should remain volatile as the Fed looks to taper, case counts remain stubbornly high, and the economy is decelerating.
Along with a low-interest-rate environment, the rising demand for technology products and solutions amid ongoing digitalization and continued innovations should keep driving the sector’s growth. Tech spending in the US is expected to grow 6.7% in 2022.
However, a bullish backdrop has led to certain tech stocks reaching price levels way beyond their intrinsic values. Considering the fundamentals and growth prospects, tech stocks Snowflake Inc. (SNOW), Cloudflare, Inc. (NET), Carvana Co. (CVNA), and Bill.com Holdings, Inc. (BILL) look way too expensive at their current price levels. So, these stocks could witness a pullback amid the market volatility.
Snowflake Inc. (SNOW)
SNOW provides a cloud-based data platform that enables customers worldwide to consolidate data into a single source to drive business insights, build data-driven applications and share data. Its platform enables the creation of its private data exchange to share and collaborate with business partners, suppliers, and employees in a centrally managed data hub.
On September 22, 2021, SNOW and Citigroup Inc. (C) announced a strategic initiative to re-imagine how data flows across financial services transactions to provide a frictionless solution for post-trade processes across the industry. SNOW’s Financial
Services Data Cloud will help C securely share and access data to help launch new customer-centric products and services, build fintech platforms of the future, and satisfy regulatory compliance requirements.
SNOW’s non-GAAP operating loss decreased 62.4% from the prior-year period to $21.90 million for the fiscal second quarter ended July 31, 2021. The company’s net loss came in at $189.72 million, down 144.4% from the prior year period. Its loss per share came in at $0.64 for the quarter, indicating a 104.7% year-over-year decline. SNOW had cash and cash equivalents of $698.55 million as of July 31, 2021, representing a 14.8% decline from the fiscal 2021 fourth quarter ended January 31, 2020.
Analysts expect SNOW’s EPS to remain negative in the upcoming quarters of the current year and next year. The stock’s EPS is expected to decline at a marginal rate per annum over the next five years. Over the past nine months, it has fallen 7.6% in price to close yesterday’s trading session at $321.50.
In terms of forward EV/Sales, SNOW is currently trading at 78.21x, which is 2336.2% higher than the 4.32x industry average. In terms of forward Price/Sales, SNOW is currently trading at 82.70x, 1938.7% higher than the industry average of 4.06x.
SNOW’s weak prospects are reflected in its POWR Ratings. The stock has an overall rating of D, which equates to Sell in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
SNOW has an F grade for Value and a D grade for Stability and Quality. In the 72-stock D-rated Technology – Services industry, it is ranked #68.
To see additional POWR Ratings for SNOW’s Growth, Sentiment, and Momentum, click here.
Cloudflare, Inc. (NET)
NET operates a cloud platform that delivers a range of network services to various industries and governments worldwide. The company provides businesses a unified control plane to provide security, performance, and reliability across their on-premise, hybrid, cloud, and Software-as-a-Service (SaaS) applications.
On September 22, 2021, NET joined the Microsoft Corporation’s (MSFT) Microsoft Intelligent Security Association (MISA), an ecosystem of independent software vendors and managed security service providers that have integrated with Microsoft Security to better defend against a world of increasing cybersecurity threats. With the integration,
Azure Active Directory B2C customers and others in the MISA partner catalog can access NET’s Web Application (WAF) to protect their applications against sophisticated cyberattacks.
During the fiscal second quarter ended June 30, 2021, NET’s loss of operations came in at $28.87 million, up 16.9% from the prior-year period. While its non-GAAP net loss decreased 24.1% year-over-year to $7.29 million, its non-GAAP loss per share decreased 33.3% year-over-year to $0.02.
NET’s EPS is expected to remain negative in the coming quarters of the current year and next year. Over the past nine months, the stock has gained 65.7% to end yesterday’s trading session at $135.67.
In terms of forward EV/Sales, NET is currently trading at 63.53x, which is 1501.1% higher than the 3.97x industry average. NET has a 67.70x forward Price/Sales, 1569.1% higher than the industry average of 4.06x.
NET’s POWR Ratings are consistent with this bleak outlook. The stock has an overall rating of D, which translates to Sell. In addition, NET has an F grade for Value, and a D grade for Stability. Moreover, it is ranked #20 of 25 stocks in the D-rated Software – Security industry.
In addition to the POWR Rating grades I’ve highlighted, one can see NET’s ratings for Momentum, Quality, and Growth, here.
Carvana Co. (CVNA)
CVNA operates an e-commerce platform for buying and selling used cars. Its platform allows customers to research, identify and inspect a vehicle using its 360-degree vehicle imaging technology and schedule delivery or pick-up.
CVNA expanded its reach in Missouri by announcing the offering of as-soon-as next-day touchless home delivery to Joplin and Springfield area residents on September 22, 2021. By pioneering online car buying, with the offering of its patented 360-degree virtual vehicle tour, seven-day return policy, and allowing customers to skip the dealership and shop, CVNA hopes to witness good sales in the upcoming months.
CVNA’s total expenses for the fiscal second quarter ended June 30, 2021, came in at $470 million, representing a 96.7% rise from the prior-year period. As of June 30, 2021, the company had $201 million in cash and cash equivalents, down 33.2% from the full year-ended December 31, 2020.
Analysts expect the stock’s EPS to remain negative in the upcoming quarters of the current year and next year. Moreover, CVNA’s EPS is expected to decline at a rate of 210.5% per annum over the next five years.
CVNA’s 474.72x forward EV/EBITDA is 4714.4% higher than the 9.86x industry average. In terms of forward Price/Book, CVNA is currently trading at 112.66x, which is 3226.2% higher than the industry average of 3.39x. CVNA has lost 10.7% over the past month to close yesterday’s trading session at $319.25.
It’s no surprise that CVNA has an overall F rating, which translates to Strong Sell in our POWR Ratings system. In addition, the stock has an F grade for Value and Quality and a D grade for Growth and Stability. Of the 76 stocks in the F-rated Internet industry, CVNA is ranked #73.
Click here to see additional POWR Ratings for CVNA (Sentiment and Momentum).
Bill.com Holdings, Inc. (BILL)
BILL provides cloud-based software that simplifies, digitizes, and automates back-office financial operations for small and midsize businesses worldwide. The company offers bill workflow, payment processing, business document filing services, electronic invoicing, and mobile application management tools.
On September 1, 2021, BILL acquired Invoice2go, a leading mobile-first accounts receivable (AR) software provider. Invoice2go’s mobile-first solution enables businesses to engage with their customers, develop bids, send invoices quickly, and get paid faster. With BILL’s payments expertise, large network, and strong go-to-market capabilities combined with Invoice2go’s product capabilities, both companies are looking forward to enhancing the digital transformation of a small and medium-sized business.
For its fiscal second quarter ended June 30, 2021, BILL’s non-GAAP loss from operations increased 1218.7% year-over-year to $6.20 million. The company’s non-GAAP net loss came in at $5.82 million, compared to a net income of $293,000 in the prior-year period. As of June 30, 2021, the company had $509.62 million in cash and cash equivalents, down 11.2% from the year-ago period.
Analysts expect the stock’s EPS to remain negative in the upcoming quarters of the current year and next year. BILL’s 57.22x forward EV/Sales is 1301.5% higher than the 4.08x industry average. In terms of forward Price/Sales, BILL is currently trading at 57.93x, 1317% higher than the industry average of 4.09x. BILL has gained 85.2% over the past nine months to close yesterday’s trading session at $276.90.
BILL’s POWR Ratings reflect this bleak outlook. The stock has an overall F rating, which equates to Strong Sell in our proprietary rating system.
The stock has an F grade for Value and Quality, and a D grade for Growth, Stability, and Sentiment. Click here to see the additional ratings for BILL’s Momentum.
BILL is ranked #146 of 149 stocks in the D-rated Software – Application industry.
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SNOW shares were trading at $316.04 per share on Friday afternoon, down $5.46 (-1.70%). Year-to-date, SNOW has gained 12.31%, versus a 19.78% rise in the benchmark S&P 500 index during the same period.
About the Author: Sweta Vijayan
Sweta is an investment analyst and journalist with a special interest in finding market inefficiencies. She’s passionate about educating investors, so that they may find success in the stock market. More...
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