News and Views

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Carvana Co. (CVNA) saw continued growth over the past year, significantly outperforming the S&P 500 and rising by approximately 271.8% compared to the S&P’s gain of about 38.5%. Despite the stock’s continued growth and positive second-quarter results, hedge funds were selling as institutions added.

Carvana is an e-commerce platform for buying and selling used cars. As most of its business involves contactless online sales, the company has benefited from the coronavirus pandemic in many ways. Consumers’ preferences toward remote interaction and shopping have changed during the pandemic. Carvana allows them to browse, purchase and finance through a convenient online platform. Consumers may then choose between getting their vehicle delivered directly to them or picking it up at one of Carvana’s automated car vending machines. Also, the pandemic has created significant supply chain disruptions, leaving new car dealerships with minimal inventory and creating more demand for used cars from both dealerships and companies like Carvana.

Mixed Results from Hedge Funds and Institutions

Carvana saw mixed results during the second quarter activity. The aggregate 13F shares held by hedge funds decreased to about 42.8 million from 42.9 million, a mild decrease of approximately 0.1%. Of the hedge funds, 22 created new positions, 59 added to an existing holding, 31 exited, and 33 reduced their stakes. In contrast to hedge funds, institutions were buying. Overall, institutions increased their aggregate holdings by about 0.1%, to approximately 93.2 million from 93.1 million. The 13F metrics between 2017 and 2021 are a good reflection of Carvana’s rising stock price and demonstrate the potential for the stock to continue an upward trend.

(WhaleWisdom)

Two-Year Forecast has Neutral Feel

Analysts expect to see an initial decline in earnings per share, though eventually earnings and revenue are predicted to continue forward on a positive trend through to 2022. The company is forecast to have a loss of -$1.05 in December 2021, which is expected to then improve to -$0.33 by December 2022. Year-over-year estimated increases could bring over $12 billion in revenue by 2021 and $15.6 billion in revenue by 2022.

(WhaleWisdom)

Optimistic Analysts

Citigroup analyst Nicholas Jones was bullish on the stock, citing better than expected results in the second quarter. Jones raised the firm’s price target on Carvana to $405 from $375 and kept a Buy rating on shares. Chris Pierce of Needham & Co. was also enthusiastic about the stock and raised the firm’s price target to $421 from $400. Pierce noted that the pace at which Carvana’s shares have been gaining ground has accelerated, and he maintained a Buy rating on the stock.

Favorable Outlook

Carvana continues to build its customer base and show growth, benefitting from the unique environment created from the pandemic. Analysts appear bullish about this e-commerce company, raising price targets as demand for used vehicles increases. Future revenue estimates are also encouraging for investors.

Snap Inc. (SNAP) experienced soaring growth over the last ten months, significantly outperforming the S&P 500. The camera and social media company’s stock rose by approximately 357.0% since the start of 2020 compared to the S&P’s gain of about 39.1%. Given this astounding level of growth, it is understandable to see hedge funds and institutions actively buying.

Snap is widely known for its technological products and services, such as the Snapchat application for smartphones and Bitmoji, personalized cartoon avatars. Snap also recently announced augmented reality smart glasses geared towards developers, called Spectacles. Snap originated as a camera company, utilizing its Snapchat camera app to connect people through a playful medium and sell advertising space. It ultimately grew into a strong player in the social media industry, focusing on empowering self-expression, increasing communication among family and friends, and general entertainment. While Snap experienced a decline in value during the earlier stages of the coronavirus pandemic, the stock has seen rapid growth in 2021 with boosts in digital advertising spending and greater demand for advertising partnerships.

Hedge Funds Are Enthusiastic

Hedge funds and institutions heavily bought Snap’s stock in the second quarter of 2021. For hedge funds, the aggregate 13F shares held increased to about 219.7 million from 207.7 million, an increase of approximately 5.8%. Of the hedge funds, 41 created new positions, 71 added to existing ones, 40 closed out their holdings, and 45 reduced their stakes. Institutions were also purchasing the stock, and aggregate holdings increased by about 3.4% to approximately 830.4 million from 803.2 million. As a result, the stock was added to the WhaleIndex 100 on August 17, 2021.

(WhaleWisdom)

Positive Multi-year Figures

Analysts expect to see earnings rise in 2021 and 2022 to an estimated $0.35 per share and $0.79 per share, respectively. Revenue estimates are also encouraging, predicting approximately $4.2 billion for December 2021 and rising to about $6.2 billion by December 2022. The 13F metrics between 2016 and 2021 are a good reflection of Snap’s ascending stock price and demonstrate the potential for the stock to continue on an upward trend, and institutional investors build longer-term positions.

(WhaleWisdom)

Analysts Raise Price Targets

Snap’s shares are setting new records for the company, and analysts have taken notice. Brent Thill of Jefferies Group LLC was impressed by the recent performance and raised their price target on Snap to $90 from $81. Barclays Investment Bank raised its price target on the stock to $81 from $75. Also, Piper Sandler Companies noted that revenue was better than anticipated. Analyst Thomas Champion reiterated an Overweight rating and $85 price target on the stock.

Positive Outlook

Snap’s amazing growth is no camera trick or tweaked reality. Hedge fund activity is an encouraging sign for investors. While Snap has its fair share of competition from tech companies and social media platforms, it has been able to innovate, stay relevant, and leverage advertising demand. Second-quarter results impressed, and earnings estimates through to 2022 provide a positive outlook.

Uber Technologies, Inc. (UBER) has been on a rocky path over the past year and a half, and the gains realized over the past six months appear to have stalled. The ride-sharing company’s stock has recently fallen, bringing it into alignment with the S&P 500. Uber rose by approximately 40.4% as of late August 2021 compared to the S&P 500’s gain of roughly 39.2% since the start of 2020.

Uber faced its share of challenges throughout the coronavirus pandemic due to government-imposed travel restrictions. However, despite the negative impacts of the pandemic, Uber recently ascended in the second quarter to a rank of 10 on the WhaleWisdom Heatmap.

Hedge Funds Are Active

Uber received positive attention from hedge funds, which increased their aggregate 13F shares held to approximately 522.0 million from about 514.5 million in the second quarter, representing an increase of roughly 1.5%. Of hedge funds, 51 created new positions, 123 added to an existing one, 51 exited, and 80 reduced their stakes. In contrast to hedge funds, institutions decreased their aggregate holdings slightly by about 1.0% to approximately 1.37 billion. The 13F metrics from 2019 through 2021 suggest that Uber’s investment potential remains steady, despite ups and downs.

(WhaleWisdom)

(WhaleWisdom)

Encouraging Revenue Estimates

Analysts appear optimistic with their revenue estimates, though earnings estimates are less rosy. It is anticipated that year-over-year revenue growth may range from approximately 44.5% to 25.9% between 2021 and 2023, which could bring revenue to about $28.4 billion by December 2023, up from an estimated $16.1 billion in December 2021. Earnings per share will initially decline in 2021 and 2022 before extraordinary year-over-year growth of 723.3% is predicted for 2023, bringing earnings to $0.43.

Mixed Reactions After Disappointing Second Quarter

Many analysts lowered price targets amid disappointing second-quarter results. Doug Anmuth from JP Morgan & Co. kept an Overweight rating on the stock and lowered the firm’s price target to $72 from $74. Anmuth believes that the recent selloff of shares creates an attractive long-term opportunity. Wedbush Securities analyst Ygal Arounian lowered the firm’s price target to $51 from $66, maintaining an Outperform rating on Uber shares. Oppenheimer & Co. analyst Jason Helfstein lowered their price target on Uber to $70 from $80 and kept an Outperform rating on shares, acknowledging Uber’s efforts to address driver supply challenges through driver incentives. However, Jefferies analyst Brent Thill is optimistic for better third and fourth quarter performance and kept a Buy rating and $75 price target on the stock following second-quarter results.

Optimism Beyond 2021

Customer demand for travel and meal delivery services remains in flux as the pandemic continues; however, it seems likely that the foundation of Uber’s business, ride-hailing, and ride-sharing, will ultimately see a rebound in demand. Increased coronavirus vaccination rates and the promise of boosters against variants will certainly help consumer mobility recover over time. Uber has taken strategic steps to strengthen its driver supply and incentivize its workforce in the interim. Uber may not be a buy for all investors, but it holds possibilities for investors seeking a long-term opportunity.

Zoom Video Communications, Inc. (ZM) saw exceptional performance over the past year, significantly outperforming the S&P 500 and rising by approximately 400.9% compared to the S&P’s gain of about 39.6% since the start of 2020. The positivity continued as hedge funds and institutions actively bought the stock in the second quarter, aligning with the company’s rise on the WhaleWisdom Heatmap to 2 from 25.

Zoom is a technology company known for its communications platform and video collaboration services. The Zoom platform enables video meetings, webinars, online chats, and calls to facilitate communication and collaboration. Also, while based in the United States, Zoom offers the opportunity for international video conference calls. The company provides a basic level of access for free and a subscription service with a greater array of resources and tools. Subscription fees serve as a significant revenue stream that expanded considerably during the coronavirus pandemic when many businesses and educational institutions were forced to transition to remote work and virtual methods of communication. The trend of telework is likely to continue even as the pandemic concludes, as employers that realized the telework cost-savings and morale benefits now embrace a more permanent hybrid work model.

Hedge Funds Are Buying

Zoom had a favorable second quarter, with hedge funds and institutions adding shares to their portfolios. The aggregate 13F shares held by hedge funds increased to about 45.3 million from 40.3 million, a change of about 12.2%. Of the hedge funds, 30 created new positions, 77 added to an existing stake, 27 exited, and 63 reduced their holdings. Institutions increased their aggregate holdings by about 10.9% to approximately 138.0 million from 124.5 million. The 13F metrics between 2019 and 2021 reflect Zoom’s rising stock price and WhaleWisdom high Heatmap ranking of two.

(WhaleWisdom)

(WhaleWisdom)

Positive Multi-year Estimates

Analysts expect to see revenue rise over the next three years, with year-over-year growth ranging from 50.9% to 19% between January 2022 and January 2024. These estimates could bring revenue to $5.7 billion by 2024. Analysts also anticipate a rise in earnings that would bring earnings per share to $4.66 by 2022, $4.74 by 2023, and $5.02 by 2024.

Analysts Upgrade

Analysts are predominantly bullish on the stock. Many have likely noted Zoom’s recent August announcement to acquire cloud contact center Five9, Inc. Analyst Steve Enders of KeyBanc Capital Markets upgraded Zoom to overweight and gave it a price target of $428. Enders shared his thoughts that video and cloud communications will be long-term priorities for enterprise information technology to support hybrid work. Morgan Stanley upgraded Zoom’s shares to overweight from an equal weight rating and raised its price target to $400 per share from $360.

Favorable Outlook

Zoom’s history of growth is noteworthy, and the company appears well-positioned to meet the strong demand for its technology. A multi-year outlook for growth brings an additional element for confidence in future performance for this tech company, which should be encouraging for investors.

Roku Inc (ROKU) experienced positive growth over the past six months, outperforming the S&P 500 and rocketing up the WhaleWisdom Heatmap to the number one ranking in the second quarter from 38 in the first quarter. Roku’s stock rose by approximately 162.3% by August 20, 2021, compared to the S&P’s gain of about 36.4% since the beginning of 2020.

Roku manufactures various digital media players for streaming videos and accessing content such as games and movies. The company has a television model in the United States. It makes additional money through hardware sales, Roku Channel advertising, and branded content. Roku also benefitted considerably from a consumer shift to streaming entertainment during the coronavirus pandemic.

Hedge Funds Are Buying

Roku experienced a positive second quarter, with hedge funds and institutions adding shares to their portfolios. The aggregate 13F shares held by hedge funds increased to about 23.1 million from 21.9 million, a change of about 5.3%. Of the hedge funds, 34 created new positions, 77 added to an existing stake, 29 exited, and 55 reduced their holdings. Institutions increased their aggregate holdings by about 3.2% to approximately 82.8 million from 80.2 million. The 13F metrics between 2016 and 2021 reflected Roku’s rising stock price.

(WhaleWisdom)

Encouraging Two-year Estimates

Analysts expect to see earnings rise over the next two years, with increases in growth from 2021 to 2022, bringing earnings per share to $1.55 by December 2022, up from $1.19 for 2021. Revenue forecasts are estimated at approximately $2.8 billion by 2021 and $3.8 billion by 2022.

(WhaleWisdom)

Analysts’ Ratings Vary

While Roku’s stock growth has been robust, many investment firms are trimming target prices. Wells Fargo & Co. and Stephens & Co. held an overweight rating on the stock while cutting price targets on Roku’s shares. Wells Fargo lowered its price target to $488 from $519, while Stephens & Co. reduced it to $475. Citigroup analyst Jason Bazinet lowered its price target on Roku to $410 from $450, based upon predictions of lower account growth. However, while account growth was disappointing, platform revenue was encouraging, so Bazinet maintained a buy rating.

Favorable Outlook

Roku’s year-to-date growth is encouraging. The company continues to be a leader in digital media and streaming devices, with optimistic two-year revenue estimates. While some analysts have conservatively lowered price targets, investment potential remains on an upward trend.