Could the success of trade with reopening come at a cost?
Bank of America analysts brought this question to attention Monday in a note that updated Booking Holdings and downgraded Pinterest and Snap, citing changes in interest rate front waves, which could highlight home equity valuations.
“This is not a call that Snap or Pinterest will miss estimates,” the note said. “This is a call where stocks could be limited in range and we have better reopening ideas.”
Booking Holdings ended trading down almost 2.5% on Monday, withdrawing its all-time high on Wednesday. Pinterest fell by almost 1%. Snap lost less than half of 1%.
“We are … up in terms of reopening trade, but I think where we wouldn’t agree with the report is that we don’t think it’s going to be to the detriment of some of these higher-growth companies,” Oppenheimer technical analyst Ari told CNBC. Wald “Trading Nation” Monday.
Instead, it is likely to come at the expense of higher-paying, lower-volatility dividends, leaving Pinterest and Snap as long-term winners, he said.
As for Booking Holdings, “it has mostly traded in a very wide range – apart from the collapse of Covid – between about $ 1,600 and $ 2,200 for most of the last four years,” Wald said.
“Now, a year after the importance of the lower market, entering this second year of the bull market, we see that several stocks are starting to break out, including Booking, overcoming the upper end of that range,” he said. “It can be considered more positive than not, as long as this breakout remains at $ 2,200.”
The reservation closed on Monday at $ 2,231.89.
The challenges remain on both sides of Bank of America’s appeal, despite improved reopening estimates, Chantico Global founder and CEO Gina Sanchez said in the same interview.
“About 20 percent of travel is business-related and 80 percent is leisure. Reservations have about the same percentage of their income,” she said. “If you assume that their entire revenue base will experience this type of growth in 2021 and 2022, then Booking actually looks cheap. But if you assume that 20% of their revenue portfolio will remain, then, in fact, it might be quite appreciated. “
The destinies of Pinterest and Snap will most likely depend on the investment landscape, said Sanchez, also chief market strategist at Lido Advisors.
“The biggest challenge out there … really comes with their profitability and whether or not they can increase profitability,” she said. “The effect of the ointment is that interest rates are rising. And as interest rates are rising, investors are really evaluating the valuations and I think the fundamentals are coming into play.”
While Sanchez anticipated that investors would favor “growth at a reasonable price, rather than pure value,” high-growth companies will still have to prove themselves, she said.
“There has to be some growth, but I really think profitability will matter, so I agree with Bank of America,” she said.
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