What happened
With the Nasdaq stock index up 2.4% as of 1:45 p.m. ET, it looks like Wall Street has decided that Monday will be a risk-on day for the stock market. It's no great surprise then that some of the riskiest stocks around -- tech stocks -- are flying higher. As of midafternoon today:
- Cloud communication company Twilio (TWLO 1.47%) is up 7.5%.
- E-commerce and gaming platform Sea Limited (SE 0.05%) rose 9.3%.
- And social media site Pinterest (PINS 4.04%) increased 9.3% as well.
But one of these stocks is not like the others.
Image source: Getty Images.
So what
In a full-throated endorsement, megabank Citigroup declared the sell-off in Sea Limited stock "overdone" this morning, reports The Fly. In the analyst's view, investors have decided to wait to see how Sea Limited's numbers look in the first quarter "before feeling comfortable to step in" and buy. Once investors see management making moves to improve user engagement, though, and adding new online games to its lineup, Citi believes the stock price will revive -- and even end this year an astonishing 158% higher than where it trades today.
Similarly, both MKM Partners and Credit Suisse commented today that they think Pinterest's stock price will be capped at $42 or perhaps $45 per share this year -- but even so, that would work out to a minimum of a 43% share price gain from today's levels. As The Fly points out, Pinterest currently sells for "a significant discount to both Revenue and EBITDA multiple relative to their pre-COVID levels," yet "trends in both the U.S. and international have seemingly stabilized as of early November."
Last but not least, Twilio, if you recall, benefited from a bullish note from Bank of America on Friday. BofA predicted that Twilio will enjoy "sustainable 30%-plus top-line growth for five-plus years," meaning the stock currently costs barely five times its revenue in 2024.
Now what
Well and good. And yet, as I pointed out last week, Bank of America did not say it expects Twilio to earn a profit in 2024. (To the contrary, most analysts don't expect to see Twilio turn profitable before 2025 at the earliest.) The situation with Sea Limited is a bit better, with profitability expected to arrive in 2024.
Meanwhile, I can't help but notice that right now, the only one of these three stocks that is earning profits already today is Pinterest. With $350 million in trailing net earnings, and free cash flow of $633 million, Pinterest sells for an almost reasonable 50 times net income and for less than 28 times free cash flow.
If it's profits today you're looking for, and you'd rather not wait till 2024 (or even 2025) to find out if your growth stock will figure out a way to grow its way into profitability, Pinterest is probably your best bet out of these three stocks.
