Yesterday was a sharp reminder that nothing is certain in the stock market. Many thought we'd weathered all of the uncertainty surrounding future Fed policy. Howevr, after posting a pair of record highs to begin the year, the benchmark S&P 500 index slumped 2 percent yesterday, selling down through to closing time.
Fresh remarks from the Fed's Jerome Powell concerning how they could raise rates sooner than previously expected were the catalyst for the decline. It was felt most acutely by technology firms. Equity markets have already seen a lot of volatility as they adjust to higher interest rates. The prospect of a cycle going forward has understandably caused investors to reconsider their fair value levels.
Let's take a look at some of the more severe hit well-known names that may be worth looking into following yesterday's drop.
Salesforce (NYSE: CRM)
The world's most popular CRM platform's shares hit an all-time high in November, but have fallen more than 25% as a result of this week's 8% drop. Still, they're only back to where they were last summer and there's a lot to like about Salesforce that might not be immediately obvious.
Their third-quarter results, published just over a month ago, demonstrated revenue growth of more than 25% year over year and exceeded analyst expectations. Management also decided to raise their 2022 forward guidance at the same time, which is one of the most bullish signals they can send to investors.
Despite this, the stock has been difficult to catch a bid for several weeks. Even last week's Wolfe Research buy call was insufficient, as the team there named Salesforce one of their top picks for 2022. They like its “leadership steam, its $27.7 billion acquisition of Slack, and its renewed focus on margins”. With its stock RSI now under 30, suggesting oversold conditions, it's definitely worth thinking about buying some shares.
Adobe (NASDAQ: ADBE)
Adobe's stock peaked at an all-time high in November, but it has dropped more than 25% since then. This week's 7% decline made it one of the worst mega-cap performers on the day. However, according to their most recent earnings report, this is a $245 billion firm that is growing revenue 20% year over year.
To be fair, the same earnings report saw management reduce their forward guidance slightly, but you have to think that after seeing a full 25% wiped off the value of their stock since, this has been adequately priced in. In the coming days, Adobe shares are likely to plummet as a bounce is almost guaranteed.
UBS' bearish comments yesterday that addressed worries over slowing growth must be addressed, but this appears to be a monster that is presently trading at a discount for those with a long-term perspective.
Meta Platforms (NASDAQ: FB)
In the past several weeks, Facebook's stock has been one of the best performing members of the FAANG group. Their shares are down only 15% from their all-time high and are still well above their low in December.
Last month, the J.P.Morgan team had no reservations about putting them on their top internet stocks for 2022 list, and this vote of confidence should be enough to get any of us thinking about investing after this week's 4% drop.
Doug Anmuth, an analyst at J.P.Morgan, said in a note to clients that he liked Meta's "strong profitability & reasonable valuation given the rising interest rate environment, with durable growth and more table stakes." The performance of their Oculus virtual reality headset over the holiday season is sure to help cement the offer after this week.