Late November and early December saw a big sell-off in many technology stocks. Unexpected hawkish commentary from Federal Reserve Chairman Jerome Powell led to fears of higher interest rates, which could depress growth stock valuations.
November and December also saw several earnings reports, in which several "stay-at-home" software companies reported decelerating growth as they lapped the pandemic. The result? Even more selling.
With many former market darlings now down 20%, 30%, or even 50% or more, several tech CEOs decided to express conviction in their companies by buying shares recently -- and in very big numbers, too.
While one should never blindly follow insiders who buy their stock, the size of these purchases should at least put the following five tech stocks on your radar for a potential bounce in 2022.
Dan Springer Buys $4.8 million of DocuSign after its post-earnings swoon
A darling of pandemic-year digital transformation, digital signature leader DocuSign (DOCU -1.39%) is now feeling the hangover.
Last Friday, DocuSign's stock was absolutely pummeled, down more than 40% following its fiscal third-quarter earnings report. While headline numbers of 42% revenue growth and 163% adjusted EPS growth looked good, the company's billings and quarterly guidance implied growth in the high-20% range -- a noticeable deceleration.
It's difficult for a company to maintain high growth rates as it gets bigger, especially lapping an extremely strong year. CEO Dan Springer wasn't fazed, stepping up with a $4.8 million purchase last week on Dec. 7-8, at prices between $138.92 and $149.15.
Springer also put a statement:
Personally, I was surprised by the extent of the market reaction last week. ... Fundamentally, the company hasn't changed and the pandemic hasn't changed our long-term outlook. That's why I made a big investment this week purchasing new DocuSign shares once the trading window opened.
DocuSign has now been more than cut in half from all-time highs set earlier this year and currently trades around 14 times sales. That's not terribly expensive, at least relative to recent history, for a high-gross margin software company growing around 30%. It's hard to know when a stock will bottom, but interested investors should study DocuSign closer after its post-earnings swoon.
Uber CEO Dara Khowsrowshahi buys $9 million -- and you can buy the stock cheaper even today
Another tech category leader is Uber Technologies (UBER -3.69%), which also saw its leader buying the stock in size recently. Unfortunately for CEO Dara Khowsrowshahi, he bought in right before the emergence of the omicron variant and the Federal Reserve's hawkish turn.
Uber actually beat analyst expectations for revenue on its early November earnings report, but when the stock didn't move, Khowsrowshahi backed up the truck, purchasing 200,000 shares just below $45 per share.
It was a bit of unfortunate timing, as Uber's shares have de-rated and now trade just under $37. That means you can buy shares today nearly 20% cheaper than the CEO did.
Meanwhile, there were several positives in Uber's recent earnings report. The company delivered its first-ever quarter of positive adjusted EBITDA, as take rates for both mobility and delivery increased. Meanwhile, mobility gross bookings nearly recovered to October 2019 levels in New York, London, and Paris.
Uber is still losing money, thanks to stock-based compensation expenses, but those losses are narrowing rapidly. For those looking for "reopening" plays, the setback from the omicron variant and the Fed may have opened up an opportunity in this mobility leader.
CEO Bob Bakish buys $500,000 in ViacomCBS, and Chairman Shari Redstone adds another $1 million
You might not think of a "legacy" cable firm ViacomCBS (PARA 5.57%) as a tech stock, but it's actually delivering impressive streaming subscriber and ad growth. And yet, its stock trades at a lowly valuation of just 8.6 times next year's earnings estimates.
Perhaps that's why CEO Bob Bakish and Chairman Shari Redstone bought $500,000 and $1 million worth of ViacomCBS stock, respectively, following the tepid response to the company's third quarter earnings report in November. As is the case with Uber, investors can buy ViacomCBS stock even cheaper today, at $31.20, compared with the insider buys around $36.
Investors appear to be unsure about the legacy media company's transition from the traditional cable bundle to streaming. But ViacomCBS' streaming revenue grew 62% last quarter to make up about 16% of revenue. Streaming platforms include Showtime and Paramount+, but the hidden gem may be PlutoTV, which is a free and ad-supported streaming service that's become a hit domestically and internationally.
Yes, there is likely some cannibalization of the declining cable bundle, but the even the company's legacy operations saw 1% ad growth and 2% affiliate fee growth last quarter, and overall revenue growth was 13%.
That doesn't seem like the results of a stock trading with a single-digit PE ratio. Of these stocks, ViacomCBS is the cheapest, and carries a hefty 3.1% dividend. It's also worth a look for value investors heading into 2022.
Skillz CEO Andrew Paradise buys $5 million
If November was unkind to growth stocks, it was absolutely brutal for stocks that recently went public via special purpose acquisition corporation, or SPAC. Skillz (SKLZ 6.63%) is such a company, having merged with its SPAC almost exactly one year ago today. The company operates a platform where people can play video games for money against competitors, not unlike daily fantasy games or online gambling.
SPACs were market darlings in the first part of 2021 but are now seen as symbols of risky market excesses. But SPACs are just a mechanism to go public, with a lot of variety among businesses that use them.
Skillz seems like one with genuine potential. The beauty of Skillz is that it has incredibly high gross margins -- a result of it being a two-sided technology platform. Developers supply the game content, while mobile gamers provide revenue. Skillz's platform runs the interface, payment mechanism, and other important features such as anti-cheating protocols.
Even though Skillz reported 70% revenue growth and 47% monthly active user growth last quarter, it wasn't enough to impress analysts. After a tepid response to earnings, CEO Andrew Paradise bought roughly $5 million in stock on November 8 at an average price of $11.50.
That's nearly $3 more than shares are trading today, at just $8.78, down 81% from all time highs. With the stock down that much and the CEO purchasing stock in size, it's another growth name to keep on your radar in 2022.
Asana's CEO buys a whopping $89.2 million in stock -- yes, you read that right
Finally, Asana (ASAN 1.00%) saw the biggest insider purchase of all, with CEO Dustin A. Moskovitz buying a stunning $89.2 million in stock at an average share price $71.35 over several days last week. Where did Moskovitz get all that dough? Well, he was a co-founder of Facebook, now Meta Platforms (META -1.27%) -- so there's that. He then went on to found Asana, a workplace productivity SaaS company that went public via a direct listing in September 2020.
Asana shares have been more than cut in half from their all-time highs reached just one month ago. Needless to say, its fall has been fast and furious, likely started by the Fed tapering announcement, and then accelerated by earnings on Dec. 2.
The thing is, earnings were actually pretty darn good. Revenue grew 70%, and net losses per share were less than expected. Net retention was over 120%, and as high as 145% among Asana's bigger enterprise customers. So it's a bit confusing as to why the stock sold off. Management forecast revenue to decelerate to 53% growth next quarter, so that could be a culprit -- but that's still pretty solid growth.
Likely, valuation was likely a concern, as Asana still trades at 42 times sales, even after the sell-off. That's still a very high valuation, normally too rich for me, even in light of strong growth. However, the nearly $90 million purchase certainly has me interested now.