NASDAQ sold off 3% yesterday, a bit worse than the S&P500 but better than the Dow. We checked in with the Wolfe technical team for their take: “Referencing the weekly momentum indicator in the bottom panel of the left-hand chart, we see that not only is the weekly MACD not yet oversold but it is still in overbought territory. It is certainly true that the market rallied a sharp 11% from early June to late July; it is also true that good market lows do not generally occur when this indicator is in overbought territory. Downside targets for the S&P are 2,700 and then 2,600.”
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Andreessen Horowitz general partner Martin Casado is best known as cofounder of software-defined networking vendor Nicera, acquired by VMware. He argues that a meta-trend will shape the B2B landscape the next ten years: B2B Growth + Sales. The software names above sell to enterprises but adopted consumer tactics to get off the ground. First they used a consumer-driven growth approach to build a base and only then layered on a sales force.
Wolfe strategist Chris Senyek turned bearish on the market in April and has expressed his concerns about asset bubbles. The biggest problems involve credit, with US government and corporate debt high, negative interest rates in Europe, and the Japan government owning a good chunk of its stock market. Tech is on his list due to stretched growth vs value stock performance, IPOs of companies lacking profit, and the rise of cryptocurrencies.
The Wolfe Tech Universe fell by 1.4% the past week, underperforming the S&P 500’s 0.5% decline. Tech is up 25% YTD. Top performers this week included Roku (+25%), Infinera (+22%), AMD (+16%), Match (+14%), and MercadoLibre (+12%). Laggards were Farfetch (-48%), ANGI Homeservices (-34%), DXC (-33%), New Relic (-28%), and Zillow (-20%). Software remains the top sector over 12 months but has faded over 3 months (Exhibits 1-2) while Semis have strengthened.
Snap called itself a camera company—Apple is closer to being a camera company. But we get what they meant with the app opening right to the camera. Murphy hits the mark—Snap is a visual communications company. Facebook did a great job playing defense with its Instagram acquisition. However, Snap is on the comeback trail with the stock up 20% over the past year and almost tripling year-to-date, positively surprising in adding 13mn daily users last quarter.
Aside from networking, general-purpose processors have won over special-purpose silicon since higher volume advantages the broader approach. Even AWS has designed its own Graviton server processor. However, Hamilton endorses specialized processors as well, such as Amazon’s Inferentia ASIC for machine learning inference (as opposed to training, which he says will require more server resources than all current server computing combined).
A Facebook spokesperson said the company wants to be clearer that the offerings are part of Facebook, and the three will send messages to each other. Sub-branding is not unusual. For example, Cloud Technology Partners was acquired by HPE and now describes itself as “a Hewlett Packard Enterprise company.” Of course, Instagram and WhatsApp have been strong standalone products though their co-founders left last year. Surveys have shown that over half of US consumers are unaware Facebook owns the two applications—does the new branding make sense?
Mark is one of our TechBrains experts and early to highlight the China threat. IP protection is of utmost importance as reflected by the demise of Nortel, Motorola, and other companies at the hands of Chinese espionage. For the first time, Mark is making Theft Nation generally available. The report calculates negative effects, such as 1.8mn global jobs permanently lost in the telecom sector from Chinese InfoMerc practices, $2.27tn in lost US revenue in three sectors from 2003-13, and $8.5bn of annual lost US personal income and payroll taxes.
The Wolfe Tech Universe declined 4.9% the past week, worse than the S&P 500’s 3.1% fall. Hardware and Semis continued to be hit by trade concerns while Software now has a negative return over three months, perhaps valuation-driven (Exhibit 1). Top performers included Pinterest (+22%), Cirrus Logic (+13%), RingCentral (+10%), Cloudera (+10%), and Delivery Hero (+9%). Laggards were Insperity (-29%), NetApp (-22%), Gartner (-21%), and Nutanix (-18%).
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