Today’s episode of Full Court Finance at Zacks dives into the extremely bullish start to 2023 that has sent tech and growth stocks soaring once again. The episode then breaks down two such growth tech stocks, Shopify (SHOP) and Block (SQ), ahead of their earnings results over the next several weeks to see if investors might want to finally buy back into these beaten-down stocks for long-term upside.
The Nasdaq posted its best January since 2001 and the buying continued in the early days of February—outside of the Friday afternoon pullback. Many stocks have posted huge single-session moves including Meta, with dozens of stocks from Tesla to Nvidia up well over 30% YTD.
At the moment, it appears many Wall Street giants and investors are betting that the earnings downturn is already priced in and that the Fed’s inflation flight is all but over. The stellar start to 2023, which has forced many short-sellers to close their positions no matter the possibly bloated prices, could prove to be the start of the next bull run because investing is all about looking ahead.
There are still many unknowns and the smoldering hot January jobs report could have some second-guessing their inflation bets once again. But it is becoming increasingly difficult to be a bear with the Nasdaq back well above its 200-day moving average that proved elusive for so long. The S&P 500 has also left the 4000 level behind and it jumped clear above its 50-week moving average for the first time since early April 2022.
The Friday afternoon downturn was to be expected given the insane run over the last few weeks and so far this year. More selling and profit-taking in the days and even weeks ahead doesn’t mean Wall Street is reversing its inflation and earnings bets.
Plus, tons of the stocks that have driven the market higher still trade well below their peaks. Many growth names and pandemic winners, like Shopify and Block, are still down well over 50% from their all-time highs.
Image Source: Zacks Investment Research
Shopify SHOP is set to report its Q4 FY22 results on February 15. The firm was a Wall Street star long before the pandemic, as businesses of all shapes and sizes turned to SHOP for all things e-commerce. Shopify has continued to expand its reach in a world that’s increasingly driven by digital commerce.
SHOP shares have soared in 2023, yet they still trade roughly 70% below their highs. Shopify’s growth outlook remains impressive even though it posted seven-straight years of between 95% to roughly 50% sales growth, including 57% in 2021. And Shopify announced near the end of January a substantial price hike for its various subscription services.
Block Inc. (SQ), formally known as Square, is also down 70% from its peaks despite a 30% YTD gain. Wall Street punished the stock, in part, because of its own massive growth that saw its post 102% revenue expansion in 2020 and 86% in 2021. Investors were also displeased with its acquisition of “buy now, pay later” standout Afterpay.
Still, Block is prepared to thrive in an economy dominated by digital, especially the movement and storage of money. Block’s portfolio includes a range of point-of-sale offerings, broader payment software and infrastructure, business loans, peer-to-peer payments, bitcoin transactions, and much more. Block is currently scheduled to report its quarterly results on February 23.
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Shopify Inc. (SHOP) : Free Stock Analysis Report
Block, Inc. (SQ) : Free Stock Analysis Report
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