The high levels of uncertainty brought to the capital markets by the Russia-Ukraine crisis is having a major impact on up and coming growth stocks.
The companies behind clothing brands, fintech solutions, online car dealerships, e-commerce leaders, and other products and services popular among Millennial consumers have fared worse than most.
An assault on high multiple growth names that started even before the events in Ukraine took center stage was only intensified by Russia’s widely condemned aggression. Millennial-friendly stocks such as Netflix, PayPal, and Spotify already find themselves down 30% or more a mere two months into the new year.
All hope is not lost though. Some of these beaten up ‘new economy’ stocks are now doing their best impression of Ukrainian citizens in pushing back. These three fighters in particular have shown tremendous resolve in recent days—and appear ready for a long battle.
Has Block Stock Finally Bottomed?
Block, Inc. (NYSE: SQ) gapped up 26% on Friday and has shown little sign of slowing down. The high volume bounce from a 52-week low has many investors believing that the fintech innovator has more left in the tank.
The former Square impressed the market with its fourth-quarter results. Payment processing volumes grew beyond the Street’s expectations as did Block’s top and bottom lines. Adding fuel to the ensuing rally was a surprisingly bright outlook for 2022 during which the company is expected to face easier growth comparisons and benefit from healthy consumer spending.
The star of management’s year-end review was Block’s Cash App, a mobile payment service launched in September 2021 that lets people transfer money to one another. The app has been quickly embraced by Millennials and other tech-savvy folks that crave the convenience of tech-forward financial solutions. It is a product that will only get stronger thanks to upcoming product enhancements and the integration of the recently acquired buy-now, pay-later software firm AfterPay.
Block’s share price is also likely to get stronger as the market is reminded of the global growth potential of the company’s commerce tools. It has bounced more than 50% from last week’s low, but at still 57% from its August 2021 peak has plenty of room to run.
Why is Carvana Stock Up?
After roughly $270 was slashed from Carvana Co.’s (NYSE:CVNA) stock price since the summer, the carnage may be done. Last week’s high volume surge suggests that the worst is over for the online car dealer and the road to recovery is underway.
Carvana shook up the auto industry last week by announcing a plan to acquire the ADESA U.S. auction business from KAR Global for $2.2 billion. The news overshadowed the company’s steeper fourth quarter loss that showed the impact of rising used car prices on sales volumes.
Instead, the market applauded Carvana’s foray into the physical car auction market at a time when global semiconductor shortages are weighing on new vehicle production—and turning used vehicles into a hot commodity. Not even Russia’s military advance could slow the buying in Carvana stock which accelerated on Friday.
Sell-side research firms have been quick to pump the brakes, however, after Carvana raced 42% over a two-day period. Four analysts kept hold ratings on the stock citing the disappointing fourth quarter results, soft first quarter guidance, and hefty price paid for ADESA.
Yet the ADESA takeover comes with sound strategic rationale. It could evolve into a major victory lap should Carvana successfully integrate the business and have the opportunity to capitalize on elevated used car demand before market conditions change. The car vending machine concept is still widely unproven, but with a more diversified revenue model, Carvana stock may be worth throwing some quarters at.
Will Etsy Stock Keep Going Up?
Etsy, Inc.’s (NASDAQ: ETSY) fall from grace has been one of the most stunning among Millennial-oriented stocks. After climbing to a pandemic-fueled run above $300, the homemade goods e-tailer came within $9 of falling to $100 last week. What a difference three days makes.
A convincing fourth-quarter earnings beat has Etsy crafting an unlikely comeback to the tune of 40% since Thursday. Both sales and profits surpassed consensus, with the latter by a country mile. Tepid first-quarter guidance due to tough year-over-year comparisons have been ignored in recent days as traders continue to bid Etsy shares.
It also hasn’t mattered that Etsy’s 16% top-line growth paled in comparison to the gaudy triple-digit growth of 2020. At least for now, the market has decided to see Etsy’s (handmade) mug as half-full thinking some growth is better than none and that sharply better earnings merit reward.
Amid a shopping backdrop where product shortages are commonplace, Etsy has proven to be a relatively reliable place to get unique, handcrafted goods and supplies. The days of stimulus checks and lockdown restrictions are (hopefully) in the past, but Etsy remains a pioneer in its space and should be able to expand in the post-Covid world.
Wall Street sure seems to think Etsy is gearing up for another run. A perfect six out of six firms have called the stock a buy since the quarterly update and gave price targets ranging from $185 to $280. We should never underestimate the power of the Millennial consumer. Etsy may be a prime example.
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