Would the success of the reopening of trade have a cost?
Bank of America analysts brought this issue into focus on Monday in a note updating Booking Holdings and downgrading Pinterest and Snap, citing changes in the tides in front of interest rates that could hurt stock valuations that stay in House.
“This is not a decision that Snap or Pinterest will lose their estimates,” the statement said. “This is a decision that stocks can be limited and we have better ideas for reopening.”
Booking Holdings ended trading with a drop of almost 2.5% on Monday, falling from its record high on Wednesday. Pinterest fell by almost 1%. Snap lost less than half of 1%.
“We are … optimistic about the reopening of trade, but I think we would disagree with the report is that we don’t think it comes at the expense of some of these high-growth companies,” said Oppenheimer technical analyst Ari Wald. “Trading Nation” on Monday.
Instead, it is likely to occur at the expense of sectors with higher dividend payouts and less volatility, leaving Pinterest and Snap as the long-term winners, he said.
As for Booking Holdings, “it has been mostly traded over a very wide range – in addition to the Covid collapse – between about $ 1,600 and $ 2,200 for most of the past four years,” said Wald.
“Now, a year after the major market fund, entering this second year of bullishness, we are seeing more stocks starting to burst, including Booking, breaking above the upper end of that range,” he said. “It can be considered more positive than not, as long as the break maintains the $ 2,200 support.”
The reserve closed at $ 2,231.89 on Monday.
The challenges remain on both sides of the Bank of America call, despite improving estimates around the reopening, Chantico Global founder and CEO Gina Sanchez said in the same interview.
“About 20% of trips are related to business and 80% to leisure. Reserves have approximately the same percentages in their revenues, ”she said. “If you assume that their entire revenue base will experience this kind of increase in 2021 and 2022, then Booking looks cheap. But if you assume that 20% of your revenue portfolio will be left behind, then, in fact, it may be highly valued. “
The destinations of Pinterest and Snap are likely to depend on the investment landscape, said Sanchez, also chief market strategist at Lido Advisors.
“The biggest challenge there … really comes with their profitability and whether or not they can actually build profitability,” she said. “The problem is that interest rates are going up. And, as interest rates go up, investors are really evaluating the valuations and I think the fundamentals are coming into play.”
Although Sanchez anticipated that investors will favor “growth at a reasonable price rather than pure value”, high-growth companies have yet to prove their worth, she said.
“There has to be some growth, but I really think that profitability will be important and therefore I agree with Bank of America,” she said.
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