Investors can easily be overwhelmed by the sheer volume of headlines about stocks every day. But some popular stories usually float to the top and deserve some extra attention. Let's discuss four stocks that recently dominated tech headlines -- Blue Apron (NYSE:APRN), Snap (SNAP 6.70%), Netflix (NFLX -0.51%), and Amazon (AMZN -1.14%) -- and see if their stories are worth following.
Blue Apron's disastrous IPO
Meal-kit maker Blue Apron's IPO was initially priced at $15 to $17 per share, but a lack of demand forced the company to lower its price to $10. But even that price seemed too high, and the stock dropped to under $7 in less than three weeks.
Source: Blue Apron.
That decline was attributed to its slowing revenue growth, weak customer retention rates, widening losses, and surging expenses. But most importantly, Amazon put Blue Apron on its hit list with its own meal-kit service.
That revelation, coupled with Amazon's planned takeover of Whole Foods Market (WFM), indicated that Blue Apron's days were numbered. The only silver lining is that Blue Apron looks cheap at 1.4 times sales -- but it's doubtful that investors will rush to catch this falling knife.
Snap slides below its IPO price
Speaking of disappointing IPOs, Snapchat maker Snap slid below its IPO price of $17 in mid-July. To add insult to injury, the IPO's lead underwriter Morgan Stanley downgraded Snap from overweight to equal weight and slashed its price target from $28 to $16.
Snap's ugly decline was caused by its slowing user growth, widening losses, murky plans for the future, and a non-existent moat against Facebook's (META 1.54%) Instagram. Facebook's answer to Snap, Instagram Stories, hit 250 million daily active users (DAUs) in late June, compared to just 150 million back in January. Snap's DAUs only rose 5% sequentially to 166 million last quarter.
Snap acquired smaller companies like geofilter maker Placed and social map app maker Zenly, as well as additional geofilter patents. But those moves befuddled investors instead of impressing them -- and that's a bad move for a stock trading at a whopping 34 times sales.
Netflix's jaw-dropping subscriber growth
Shares of Netflix surged 14% to an all-time high on July 18 after it posted revenue and subscriber growth that beat analyst expectations. Revenue rose 32% annually to $2.79 billion, which narrowly topped estimates.
Source: Netflix.
It added 1.07 million domestic subscribers and 4.14 million international subscribers, which shattered expectations for 633,000 new domestic streaming subscribers and 2.63 million international subscribers. That growth helped its international subscriber base narrowly eclipse its domestic base.
However, Netflix's earnings growth still fell short of estimates, due to the rising costs of producing original content. The stock also remains very pricey at 239 times earnings and 9 times sales. As a result, Netflix remains a divisive stock. The bulls believe that it's destined to disrupt traditional TV and movies, while the bears believe that its expenses will eventually overwhelm its top line growth.
Amazon's rare price target downgrade
Lastly, Amazon was recently hit by a rare price target downgrade from Deutsche Bank analyst Lloyd Walmsley, who retained a buy rating on the stock but lowered his price target from $1,150 to $1,135.
Walmsley claimed that Amazon Web Services (AWS), the company's core profit driver, might experience a near-term slowdown, although he remains bullish on the platform's long-term potential. Walmsley also stated that he remains upbeat about Amazon's retail growth opportunities in both North America and overseas markets.
That "downgrade" was timid, and doesn't seem meaningful considering that the stock remains about 10% below Walmsley's reduced price target. While AWS might face near-term headwinds with rivals like Azure sharpening their knives, I believe that Amazon's growing list of AWS features, expanding Prime ecosystem, and widening moat will help it keep punishing brick-and-mortar and cloud rivals for the foreseeable future.
