Tech stocks have emerged as winners of the stock market for the first two decades of the 21st century. One would suspect that the trend should continue into the third, considering how the sector has grown over the years.
With the growing influence of technology in different industries, tech stocks have evolved from being mere speculative picks to now being viable options for consistent blue-chip growth.
Tech stocks have outperformed the broader market amidst the economic havoc created by the novel coronavirus. The sector has provided 37% returns to its investors in the past 12 months compared to the 10% provided by the S&P 500.
However, not every tech stock has performed well on the stock market in the past year. The pandemic has impacted certain tech stocks more than others, and the article looks to explore the tech stocks that need to be careful going forward. These stocks include the following:
Tech Stocks: GoDaddy (GDDY)
GoDaddy is one of the largest internet hosting and domain registrar companies in the world. It was founded in 1997 by Bob Parsons and is headquartered in Scottsdale, Arizona. As of April, it was handling over 18.5 million customers and employs over 7,000 employees worldwide.
Over the past month, GDDY stock shed 8.8% of its value. The company witnessed a 9% drop on June 24, when it announced that it would be implementing a restructuring program impacting 814 employees. The restructuring comes in the wake of the challenges the company faces in its outbound sales.
According to the company, outbound sales have not been effective during the Covid-19 pandemic. Therefore, 814 employees would have to be relocated, laid off or transitioned to a different position within the company.
GoDaddy will have to incur approximately $15 million in pre-tax charges from restructuring, which consist of severance payments and related costs. It will also have to recognize impairment expenses related to specific lease assets valued at $58 million. These measures have negatively impacted GDDY stock, and the company needs to ensure that the cost savings are re-invested to generate higher sales soon.
NortonLifeLock is an American software company that specializes in the provision of cybersecurity software and services. It is headquartered in Tempe, Arizona, and was founded in 1982 by Gary Hendrix. It is a member of the S&P 500 stock market index and is a Fortune 500 company.
NLOCK stock shed 5.2% of its value in the past month. This is surprising because the company delivered better than expected results in its fourth quarter of fiscal 2020. Though revenues declined by 0.5% year-over-year, the company beat the consensus estimates.
Management expects low-single-digit bookings growth for the rest of the year, due to the pressures exerted by the pandemic.
NLOK stock lost 20% of its value between Feb. 19 and March 23 when the broader market lost 34% in the same period.
I believe that Norton’s recent decisions have put it in a tough spot. It sold its enterprise security business to Broadcom (NASDAQ:AVGO) last year and is squarely focused on the consumer security segment, which hasn’t benefited it that much. Hence, it needs to rethink its strategy from a consumer and enterprise perspective.
Black Knight (BKI)
Black Knight is an American corporation that provides integrated technology, services, data sets along with analytics to real estate industries. It is headquartered in Jacksonville, Florida, and was founded in 2014.
Last month, BKI stock shed 6.8% of its value. The company recently announced posted healthy first-quarter numbers but revised its full-year outlook downward. The company has witnessed lower foreclosure-related volumes in its specialty servicing software business and was forced to lower its guidance for the year.
The company is now calling on earnings to be between $1.90 to $1.97, down from $1.97 to $2.06.
As of this writing, Muslim Farooque did not hold a position in any of the aforementioned securities.