Recent market moves have beaten up the tech sector. Now investors are seeing these stocks trade at low multiples, prompting some investors to shop around and bottom-fish for tech stocks. One analyst believes it has found a few that offer a little upside potential for cautious investors.
Piper Sandler issued some calls recently with a focus on tech stocks. Each call is somewhat positive, but the lead analyst on the call, Thomas Champion, noted that there are some things to be wary of for each.
Champion notes that, after a strong two-year stretch, digital advertising spend looks to be normalizing. Also group multiples have declined and are 40% off recent highs, but history suggests multiples may not rerate until after ad spend growth bottoms.
While market headwinds have put a damper on the markets in general over the past few weeks, Piper Sandler believes that these stocks could provide at least a little upside for the time being.
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Piper Sandler downgraded Pinterest Inc. (NYSE: PINS | PINS Price Prediction) to a Neutral rating from Overweight, and it cut the $35 price target to $23, which still implies upside of 21.5% from the most recent closing price of $18.93. Champion says that channel checks on Pinterest “remain mixed” due to “challenged” audience growth and a lack of new ad formats. He concludes that engagement concerns may persist as the company competes with more established video-first platforms.
Pinterest stock has a 52-week trading range of $16.14 to $81.77, and it traded near $19 a share early Thursday. The stock is down about 48% year to date.
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Snap
The downgrade of Snap Inc. (NYSE: SNAP) was to Neutral from Overweight. The $30 price target dropped to $18, which implies upside of 29% from the most recent closing price of $13.93. Overall, Piper Sandler is concerned about Snap in a worsening market. Last week’s preannouncement was indicative of deteriorating conditions, and channel checks suggest slowing spend in the company’s two largest verticals, entertainment and apparel.
The stock was last seen trading near $14, in a 52-week range of $12.55 to $83.34. Shares are down nearly 70% year to date.
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Twitter Inc. (NYSE: TWTR), like many other internet companies, saw lowered estimates “across-the-board.” However, Champion raised Twitter’s price target to reflect the pending buyout by Elon Musk. He describes in the report that it is “difficult to say whether the Musk saga is impacting advertiser spend on the platform, although we’d lean toward that being a slight negative.” So, Piper Sandler reiterated a Neutral rating but raised the $51.20 price target to $54.20. That implies upside of 38% from the most recent closing price of $39.30.
The 52-week trading range is $31.30 to $73.34, and shares traded at $39 Thursday morning. The stock is down about 9% year to date.
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