Friday, July 1, 2022

Tech’s account of reality is still incomplete

Many companies in the sector have signaled their surrender to reality. In a May shareholder letter, Internet holding company IAC / InterActiveCorp. The global reassessment of war, inflation and risk has led to a proper reset in the assessment framework that they expect to last for some time, writes Joey Levin, CEO of. .

Yet fund manager Kathy Wood, in an installment of her webinar, argued “in the no,” that the problems that arise in both the world and the market place more opportunities for technological innovation.

Almost everyone in technology has been hit hard lately as investors have suddenly turned to profit and cash flow creation by valuing any price increase. Shares of IAC, for example, have fallen 53% in the last 12 months, while Ku. According to FactSet, Wood’s ARK Innovation Exchange-traded fund is down 64%.

The biggest stories in technology lately are accounting. Netflix said last month that it would run ads – something that co-CEO Reed Hastings has long avoided, calling it a form of exploitation. The once ambitious Peloton Interactive fired its founder, lowered the price of its hardware, and consolidated that hardware into a new subscription tier, hoping for a more accessible future. This week, Snapchat parent, Snap, warned that the growth of online advertising is slowing more than market expectations, sending social media stock diving.

And, especially after growing up on the promise of automated home-flipping or “iBuying”, online real-estate company Zillow Group quit the business, with CEO Rich Barton calling it “too risky, too volatile.” Its earnings, “very little chance of return on equity.”

So much for the premium of innovation. Shares of these four companies have fallen by an average of 75 per cent in the last 12 months. So the market has not yet turned to their realism. But companies that dream of unlimited growth can set themselves up for even greater failure.

In an email to staff earlier this month, Dara Khosroshahi, chief executive of Uber Technologies, acknowledged that the market was moving away from the current growth, but said he wanted to see even faster growth in areas including food distribution. On the company’s freight business, he said less than 10% of investors have recently asked about it. “Freight needs to grow even more so that investors recognize its value and love it as much as I do,” Khosroshahi wrote.

Opendoor, a pure-play iBuyer, hopes to become a “national, all-market company.” According to its latest earnings report, Opendoor was live in only 48 markets, with another 88% of people in the country considering it affordable. Manage to make money in the first quarter — But it was in an exceptionally strong housing market in which revenue increased 590%, which is unlikely to last.

Surprisingly, Mrs. According to FactSet, Wood’s ARK Innovation ETF has seen a net inflow of approximately $ 1.4 billion this year.

It doesn’t matter that it took Nasdaq 15 years to get back to the top of since the early 2000’s. Ms. Wood says her investment period is five years. Her research suggests that today’s market conditions are somewhat similar to the tech and telecom bubble, as her companies are still predicting sales growth, while the “seed” that failed in the early 2000s is losing revenue. Of course, when you compare the current, everything can be done to look softer, as opposed to what was the most volatile market period to date.

“The strongest bull markets climb the wall of anxiety … this time, the wall of anxiety has risen to enormous heights,” Ms. Wood wrote of the market today. Meanwhile, her fund is expecting a return of about 7x for her position. In the next four years electric-vehicle maker Tesla. It sees a 1,000-fold increase in market capitalization by 2030. And recently it has been said that the value of Bitcoin will increase to $ 1 million in the next four to eight years.

A lot can happen in the meantime. Elon Musk’s $ 54.20 per share offer for Twitter already looks like his own example of irrational enthusiasm, a month after he made it, Twitter’s stock is now 34% lower than his bid. Shree also appears to be dawning. Kasturi said he has valued the company with tremendous potential, but today it faces challenges.

Yet enthusiastic tech investors need to look closely in that black mirror.

This story has been published from the Wire Agency feed without modifying the text

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