To us, there are two sides to the current market. Firstly those companies that are exposed to increasing demand for their underlying products and services (where growth expectations have been low) and secondly those companies that have been subject to high growth, large market caps (relative to cash flow) and high expectations for growth and where the reality is starting to disappoint.
An example of a US stock in the second category, with a product that we still use more than ever is Zoom Video Communications. The stock is down -58% from its Feb-21 peak and still with a market cap of USD $55bn the FY22 PE has more than halved from 94x to 38x. Customer numbers, revenue and cash flow are all experiencing strong growth but the market price too rich for the realized growth. Other stocks like Zillow, DoorDash, Pinterest and Twitter are all well off their highs. Locally stocks in the sector have also come under pressure with Afterpay still having a market cap of $26bn despite falling from the mid $130’s to low $90’s since Square announced that it would acquire the company in an all scrip deal in August 2021.
The retracement in tech names coincides with a part-normalization of interest rates and with the Federal Reserve retiring the word transitory from its description of inflationary trends during the month, we imagine the trends in tech stocks form part of a cycle that has some way to run.
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Ethical Partners are pleased to see Australia take the next steps to implement mandatory climate reporting with the release of draft climate standards, which we provided feedback on.
Ethical Partners have continuously called for the provision of high quality, comparable data on company’s climate governance and carbon metrics, which we believe is imperative for investors to fulfil the potential of responsible investment.
Ethical Partners have been proud to have been active supporters of the TNFD Forum over the past few years, and to provide regular feedback on the development of the official TNFD recommendations, which were launched in December, as well as to be active members of the RIAA Natural Capital Working Group.