Many technology stocks plummeted in 2021. Cathie Wood’s high-growth, tech-stock-focused exchange-traded fund ARK Innovation suffered a 24 percent loss in value last year. That was during a period when the S&P 500 was up 27 percent, or more than double its historical averages.
The tech sector is also stumbling out of the gate in 2022, down nearly 10% versus an essentially flat index. The two technology companies listed below were once high-flying stocks that lost 50% or more of their value last year.
Alibaba
Alibaba reported a 33 percent year-over-year increase in commerce-segment revenue for the six months ending last September. It reached $54.5 billion and accounted for 86 percent of total sales for the period. In addition, the segment was responsible for all of Alibaba’s operating income. Hence, it adjusted earnings before interest, taxes, depreciation, and amortization. Even after excluding a late-2020 acquisition in the division, Alibaba’s revenue was 20% higher for the six months.
The e-commerce giant sold $84.5 billion in gross merchandise volume (GMV) during the 2021 Singles Day, an 11-day consumer spending extravaganza. Amazon.com reported a record $11.2 billion in sales during its two-day Prime Day event.
Because the company is so large and still growing, Beijing has begun to target it after Jack Ma criticized regulators. Due to the crackdown, Ma went underground for a while. However, Alibaba was still penalized for monopolistic behavior, receiving billions of dollars in fines for various infractions.
The stock has dropped 50% from its 52-week highs (it had been much lower until recently). Even Charlie Munger of Berkshire Hathaway thought the stock had become too cheap to ignore and began buying up shares. The store is currently trading at 19 times trailing earnings and a whopping two times next year’s estimates.
Alibaba also recently announced a turnaround plan to reinvigorate sales growth by targeting older shoppers, adding more VIP members (who tend to spend more than non-members), and increasing advertising efficiency with artificial intelligence and automation.
Even a broken Alibaba is still a massive growth machine that appears to be ready to run again.
Fastly
Fastly a leading cloud-services provider has been working hard to regain its footing since a service outage last summer knocked much of the internet offline. Thousands of government, social media, and news websites went down, leaving users in the dark and disconnected.
Aside from that blunder, Fastly is also dealing with costly investments it needs to make in its content-delivery network, which, combined with growing employee headcount, has taken a heavy toll on its bottom line.
Fastly has never made a profit. The third-quarter net loss was $56 million, or $0.48 per share, compared to $24 million, or $0.22 per share, the previous year. Even after adjusting for inflation, losses increased from $0.04t to $0.11 per share.
Nonetheless, its business is expanding. Revenue increased by 23% to $87 million, and the company remains committed to reaching $1 billion in annual sales by 2025. Fastly’s clientele continues to grow as businesses move their data to the cloud, reaching nearly 2,750 customers at the end of Q3.
The introduction of the metaverse, a virtual world where people can interact with one another and with businesses and brands, may provide Fastly with one of its most important levers to pull for future growth.
