3 Top Tech Stocks That Are Down More Than Bitcoin And Ethereum
Cryptocurrency has a reputation for both explosive growth and cripplingly dangerous volatility. In many ways, the U.S. Stock market sell-off has been much more volatile. The Nasdaq’s decline isn’t representative of the drawdowns we’ve seen in individual large-cap and small-cap stocks. As an example, PayPal Holdings ( PYPL -1.41% ), Shopify ( SHOP ), and Meta Platforms ( FB -1.43% ) are all down more from their 52-week highs than Bitcoin ( BTC -0.34% ) or Ethereum ( ETH 0.49% ). Here’s the case for buying each tech stock now, as well as how volatility could impact your investments going forward.
Image source: Getty Images.A play on the war on cash
In just seven months, the share prices of PayPal have been cut by two-thirds, which has dropped PayPal from the fifth-largest U.S.-based financial services company by market cap to not even cracking the top 10. PayPal stock’s ultra dip makes it look more like altcoins such as Solana or Cardano than Bitcoin and Ethereum, let alone a typical large-cap industry-leading business.
PayPal is transitioning from a young and fast-growing company to a mature and established company with moderate or even low growth. That step change has investors confused about how to price PayPal stock.
Although PayPal’s growth is slowing, it is posting consistent earnings and free cash flow (FCF) — two core fundamentals that make a company worth owning over the long term. In 2016, PayPal earned $10.8 billion in revenue, $1.4 billion in net income, and $2.5 billion in FCF. In 2021, five years later, it more than doubled revenue to $25.4 billion, tripled net income to $4.2 billion, and more than doubled FCF to $5.4 billion. That’s a great-looking run. The concern is that when we focus on 2021 compared to 2020, it’s an ugly chart.
PYPL Revenue (Annual) data by YCharts
Prior to its Q4 2021 post-earnings sell-off, PayPal stock fetched a premium valuation because it was seen as a company that could grow its revenue by 20% or more per year while also growing net income and free cash flow. However, PayPal failed to do that in 2021, with revenue growing less than 20%, net income being down, and free cash flow growing less than 10%.
To make matters worse, PayPal forecasts a slowdown in new account growth and revenue growth of just 15% to 17% in 2022. For this reason, it’s unsurprising that the market needs time to value PayPal as a slower-growing company. From extremely expensive to plain expensive
Shopify posted what was, by most accounts, an impressive quarter and a record-smashing year. But in hindsight, it’s clear to see the company’s stock price got ahead of itself. Shopify was a classic example of a phenomenal business with an overvalued stock.
Investing, at its core, is all about buying a company for a price that is justifiable based on its future earnings growth. It isn’t Shopify’s fault that people kept bidding its stock price up to a level that was almost unsupportable from a growth standpoint. Until the recent sell-off, there were much more attractive buys in e-commerce, like United Parcel Service, for example. That is, until the share prices of Shopify collapsed by 63% in just three months.
Shopify is still an expensive stock, trading at a forward price-to-sales (P/S) ratio of 13 and a forward price-to-earnings (P/E) ratio of about 175. But it’s a lot cheaper than it used to be. Shopify estimates that it powers 10% of the U.S. E-commerce market in terms of transaction volume. If Shopify continues to increase its share of the e-commerce market while the market overall also grows larger, than Shopify could grow into its valuation over time. For that reason, risk-tolerant investors could consider opening a starter position in Shopify now.The metaverse is a high-risk, high-reward gamble
Meta Platforms, formerly known as Facebook, shaved more than the combined current value of PayPal and Shopify off its market cap in a matter of months. What was once a company worth over $1 trillion is now worth $550 billion.
As evident by the name change, Meta Platforms is undergoing a makeover as the company invests billions in virtual reality, alternative reality, and other avenues to make sure it can succeed in an increasingly virtual world. Meta Platforms is threatened by Web3, which is the idea of transferring ownership of information and the internet away from sovereign nations and corporations into the hands of individuals. It’s an empowering proposal, but it’s also terrible for Meta’s business, which depends on data and ads.
A decentralized internet could mean that companies like Facebook have less control over information, information that is vital for identifying demographics and behaviors that advertisers look for. By investing in the commercialization of the metaverse, Meta Platforms is essentially hedging its business so that it can thrive in the internet age..
A key driver pushing Meta Platforms’ stock lower is slowing growth. Meta is guiding for just 3% to 11% revenue growth in the first quarter of 2022 compared to Q1 2021. Another major factor driving the stock lower is the concern over prolonged losses incurred by investments in the metaverse, as represented by Meta Platforms’ Reality Labs (which it previously didn’t disclose on its income statement).
For 2021, Reality Labs posted an operating loss of $10.2 billion, and Meta told investors that research and development spending would only increase from here. For investors that aren’t interested in the metaverse, this kind of strategic plan is probably not something they want to be a part of. But for those who believe in Mark Zuckerberg and the metaverse, now could be one of the best times to start loading up on Meta Platforms’ stock — and the company has a forward P/E ratio of around 16, which is the lowest it has had in years.Volatility is here to stay
Even if you’re uninterested in PayPal, Shopify, or Meta Platforms, the harsh reality that all three stocks have been as volatile as major cryptocurrencies illustrates that markets can be irrational in the short term. In today’s information age, news spreads like wildfire around the globe in seconds. Retail investors have access to tools once reserved for experts.
As we saw in December 2018 and March 2020, and as we are seeing now, market corrections are happening faster than ever before. It may be best to accept that volatility, even in large established companies, is simply the price of admission for being a long-term investor.
This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis – even one of our own – helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.
Bitcoin, Ethereum And XRP: The Price Levels That Must Hold
Frankfurt, Hesse, Germany – April 17, 2018: Many coins of various cryptocurrenciesgetty
It’s telling that the major cryptocurrencies have failed to sustain a rally as a major geopolitical event unfolds. Those who’ve told us that the cryptos would make a great hedge against this kind of uncertainty are clearly mistaken. At least gold and silver blasted upward on the invasion news if only for a few hours.
The price charts tell the story for bitcoin and ethereum: both are trading within striking distance of their most recent lows. From the viewpoint of classic price chart analysis, it’s important for those long that these levels hold. A drop below is likely to trigger the kind of dumping that gets attention.
Here’s the daily for an up close view of Bitcoin:
Bitcoin daily price chart, 2 27 22.stockcharts.Com
It’s that late January low down there near 34,000 that must hold. On the positive side, you can see how buyers have swooped in twice at or near that price — those are the big dark volume bars along the bottom of the price chart.
It’s unfortunate for those long, however, that Bitcoin continues to trade below both the 50-day moving average (the blue line) and the 200-day moving average (the red line). This is very unlike the old days when the crypto seemed to stay above both, no matter what. Those days are over, at least for now.
The Bitcoin weekly price chart looks like this:
Bitcoin weekly price chart, 2 27 22.stockcharts.Com
If it breaks below that 34,000/33,000 level, then Bitcoin could find support at the June/July, 2021 lows near 28,000. If the crypto were to drop below that level, it would not be a good situation for anyone still in love with the thing.
Note that the momentum indicators are diverging negatively from price on this weekly look: the relative strength indicator (RSI, above the chart) and moving average convergence/divergence indicator (MACD, below the chart). Take a look at how the 50-week moving average (the blue line) is now trending downward after months and months of just upward.
The daily price chart for Ethereum looks like this now:
Ethereum daily price chart, 2 27 22.stockcharts.Com
A drop below the late January low of just under 2200 would be a problem. For the bulls, the volume of buying last week was substantial as the price dipped toward that low — but then dried up as it attempted to move higher.
In the meantime, Ethereum’s price remains below a down trending 50-day moving average — and well below the 200-day moving average which appears to be flattening after a steady upward look.
Here’s the weekly Ethereum price chart:
Ethereum weekly price chart, 2 27 22.stockcharts.Com
So if it breaks below the 2250 level, the next support level (where previous buying showed up) would be down there near 1750, the June/July 2021 lows. You can see the negative divergences between the price and the momentum indicators (the RSI, above the price chart and the MACD, below it).
The XRP daily price chart is here:
XRP daily price chart, 2 27 22.stockcharts.Com
As it’s closed above the 50-day moving average, slightly, you could say that XRP is a bit stronger than Bitcoin and Ethereum here. The point is: no big rally on the geopolitical news for this crypto either. A drop below the late January lows near 55 would be concerning for the volatile “Ripple.”
The weekly price chart for XRP looks like this:
XRP weekly price chart, 2 27 22.stockcharts.Com
You would have to be in love with volatility to even consider a cryptocurrency that moves like this: from about 1.90 in April, 2021 down to about 50 cents by June, July, 2021. Now trading below its 50-week moving average, is the next move a sell-off toward the 200-week moving average at .49?
We will find out.
Not investment advice. For information purposes only.
Please find more words & charts at my website:CheapbargainstocksCheap Bargain Stocks – Find The Most Undervalued Stocks On Wall Street
Is Ethereum A Bigger Investment Risk Than Bitcoin?
Major financial institution Morgan Stanley has called Ethereum a greater investment risk than bitcoin.
What’s happening in the world of crypto and blockchain? Here’s eToro market analyst and crypto expert Simon Peters’take.Geopolitical tensions send crypto spiralling
Geopolitical tension sent crypto spiralling last week, killing off a nascent recovery for bitcoin and ether prices, among others.
The price of bitcoin began the week marching to the $44,000 level but sank on renewed tensions between Ukraine and Russia on Thursday. The price dropped from a high of $44,510 on the eToro platform to trade around the $40,000 level.
A second hit to crypto prices took place over the weekend on the news that a major NFT hack took place. The panic from NFT traders on social media sent the price even lower to trade around $38,000. At the time of writing the price has recovered a little and is now around $39,000.
Ether likewise rose above $3,100 early in the week before plummeting on Thursday on geopolitical tensions. The price reached as low as $2,561 on eToro before recovering to trade around $2,700 this morning. Dominoes fall as Georgia signal crypto tax incentives
Georgia has become the latest state in the US to signal that it’s ready to incentivise the crypto mining sector.
The state has clearly seen some of its neighbours beginning to benefit from the burgeoning crypto sector and does not want to miss out on potential tax receipts from inviting businesses to its neighbourhood.
The measures in legislation are small but the intent is big. Like the legalisation of marijuana in the US, state-by-state, the dominoes are falling when it comes to pro-crypto policies.
The Governor of Colorado also recently announced he was open to the idea of taxpayers paying their bills in crypto, with the hope the state would be able to accept crypto payments by the summer. Governor Polis sees Colorado as the ‘first digital state.’
What is clear is that a variety of states are now vying to be seen as the most pro crypto possible. This is a very positive signal for the market and the industry more broadly. Sequoia bets big on crypto
Major investment firm Sequioa has made a $500 million bet on crypto, launching a fund to invest in tokens.
The fund will mainly buy cryptoassets on third-party platforms, functioning as a sub-fund to the flagship Sequoia Capital Fund which invests in firms in the cryptoasset space.
The move is a big bet from Sequoia on the cryptoasset market and marks an interesting moment, especially given some of the softness in token prices in 2022.
The firm says it is backing tokens with a 20-year lens. What is clear from this is that crypto is no longer about making a quick profit before diving out – major financial institutions are buying in and preparing to hold for the long term.
Long-termism is fundamentally a good thing, and a huge confidence boost for the market at a tricky moment. Morgan Stanley (NYSE:MS) sees Ethereum risk potential
Major financial institution Morgan Stanley has called Ethereum a greater investment risk than bitcoin.
The firm grounded its scepticism in the fact that bitcoin has a ‘unique’ purpose, whereas the Ethereum blockchain has a sea of competitors in the likes of Cardano, Solana and others.
This is fundamentally correct. Bitcoin is far and away the most powerful crypto for what it does. Similarities could be drawn with Dogecoin or SHIB, but really they don’t compare.
The comparison of Ethereum to other app-building blockchains is fair, however. The question for investors is to balance this risk and think about diversifying within the sector so as to have a stake in a variety of projects.
With 51 tokens on the eToro platform and counting, investors have more choice than ever in this regard. It’s really important people assess their investments and research the use cases. But we’re at a really exciting time for the sector and it’s only going to get more dynamic.