Betting on speculative tech stocks doesn’t seem like such a great idea. Not with the Nasdaq 100 in free-fall and investors rushing to take some of their AI stock profits off the table before the bear can claw it away from them. Though it seems risky as ever to be betting on some of the hyper-growth names, they seem far less risky compared to just a few weeks ago.
Just last week, rate cut expectations were relatively modest. After the Japan stock market implosion and cratering in tech plays, though, it seems like a rate cut could come even sooner.
Perhaps more than a trio of cuts could be made by year’s end, especially if the Federal Reserve finds the need to do an emergency rate cut. Undoubtedly, it’s tough to time the Fed rate cuts. A dovish pivot seems likelier as market participants prepare for a harder landing for the economy.
Increased dovishness is good news for the unprofitable, debt-laden hyper-growth tech stocks, even if it means a slightly tougher ride for the economy from here.
Rubrik (RBRK)
Rubrik (NASDAQ:RBRK) is a unique mid-cap ($5.4 billion market cap) cybersecurity firm that looks quite interesting after its latest 20% plunge off late-July highs. Undoubtedly, RBRK stock has not been public for very long, and while the limited financial track record and trading history may be a concern for some, I do view the name as nothing short of intriguing for investors with the risk tolerance.
Perhaps the lackluster post-IPO trading activity is more of an opportunity for growth investors looking to do well in a falling-rate environment that could see a growing number of major cybersecurity breaches.
The stock recently earned an “outperform” from Baird, who went as far as to say the firm “stands out as a top-tier data security vendor” in this environment where “data and cyber threats” are “surging.” Until tech can bottom, though, expect RBRK stock to amplify any market volatility.
Toast (TOST)
Restaurant management software developer Toast (NYSE:TOST) has had an even rougher ride since it debuted on the public markets back in late 2021. At writing, TOST stock is down close to 60% from its peak. And while the company has been gaining so far this year, up around 32% year to date at the time of writing, shares are still miles away from their highs.
Recently, Mizuho Securities analyst Dan Dolev recently upgraded TOST stock to “outperform,” noting that it could make strides on the profitability front as it takes steps to trim credit processing costs.
Given Toast’s strong footing in the restaurant scene, perhaps the firm has enough negotiating power to land a much better deal. Dolev thinks such efforts could help Toast “significantly improve” profits. If Dolev is proven right and Toast can jolt its margins, perhaps TOST stock isn’t as “toast” for the rest of the year, even if the Nasdaq 100 ends up flirting with a bear market.
Unity Software (U)
Shares of video game engine developer Unity Software (NYSE:U) have shed over 92% of its value from peak levels. It’s hard to find anybody who’s made money in the name, with U stock recently touching down with all-time lows below $14.50 per share.
However, a depressed share price and hopes for lower rates alone aren’t enough to justify backing the stock at today’s historic lows. At just 1.88 times price-to-book (P/B) and 2.7 times price-to-sales (P/S), expectations have essentially been lowered to the floor.
Unity needs to prove it can step over the low hurdle, though. And after a few horrid quarters and widespread layoffs, it’s becoming difficult to formulate any sort of contrarian bull case for U stock. Perhaps the launch of Unity 6, which includes intriguing AI innovations, could be the catalyst the firm needs to right the course.
On the date of publication, Joey Frenette did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
On the date of publication, the responsible editor did not have (either directly or indirectly) any positions in the securities mentioned in this article.
