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Market Insights / Commentary

Turnarounds in tech?

By David Russell

This article is not a recommendation and is intended for educational purposes only.

Earnings, economic data, inflation, the Fed, market crashing, market bouncing. February’s been so busy, it’s easy for tidbits to fall through the cracks. Today we want to revisit some items that traders might have missed or forgotten about. It’s especially interesting in the technology sector because some potential turnaround stories emerged.

First and foremost was Twitter (TWTR), which shot to its highest level in 2-1/2 years on the heels of its first profitable quarter ever. Snap (SNAP) also surprised to the upside, and pretty soon analysts dreamed about the social-media upstarts taking business from behemoth Facebook (FB).

Next up, FireEye (FEYE). Much like TWTR, the maker of security software went public in 2013 and initially rallied amid much fanfare. Much like TWTR, it also went into a prolonged selloff as results disappointed. But, much like TWTR, recent results have shown signs of a turn.

Just look at the numbers on February 8. Earnings beat. Revenue beat. Guidance beat. FEYE swooned briefly the next day as the broader market crashed, but quickly rebounded. By the way, there could be more news at the analyst day this Thursday, March 1.

Criteo (CRTO) is the most obscure name on our list. The web-marketing company got cut in half between last spring and early this year, but has rebounded 46 percent from this month’s all-time low. Sentiment’s been very bleak for a while, but several analysts are starting to view the glass as half-full and management is touting success with new products. On top of that, CRTO trades at low multiples (less than 1x sales) given its double-digit top-line growth and investor enthusiasm for the broader tech sector.

Cloud-software provider Twilio (TWLO), on the other hand, is anything but cheap, trading for about 8x revenue. It’s also gone pretty much nowhere for over a year, but is now bucking the top of its range on the heels of a strong quarter. Another thing to watch in TWLO is the short interest (30 percent of the float), which could result in a “squeeze” higher if panicked bears are forced to buy stock.

Again, these are just some observations for education purposes only, and are not recommendations.

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