Everyone is hoping the market might be bottoming and by the recent actions of Bank of America clients, some evidently think the lows must be in sight. Last week, BofA customers splashed out $6.1 billion on US stocks, in what amounted to the third largest inflow since 2008.
While the bank has stated it is not as confident the bottom is quite so close, it’s not hard to see why investors feel the time is right to lean into equities. The widespread losses have left scores of beaten-down stocks looking quite cheap, so it might be time to get the stock picking rod out and go for some bottom fishing.
With this in mind, we dived into the TipRanks database and pulled out three such names that have taken it on the head in 2022. All are down by more than 40% this year, but that quirk aside, they also share another characteristic; all 3 are rated as Strong Buys by the analyst consensus and are projected to pick up steam in the months ahead. Let’s see why the Street’s experts think these names make good investment choices right now.
If we’re on the subject of beaten-down names, then a good place to start would be in the tech sector, a corner of the market that has been particularly hard-hit this year. Sprinklr is a SaaS company specializing in customer experience management solutions. The company’s AI-powered platform, Unified-CXM, helps its clients monitor and interact with customers with the aim of delivering better experiences. Some of the world’s biggest brands are clients, including Microsoft, Adobe and Oracle, amongst others.
Sprinklr is relatively new to the public markets, having held its IPO in June 2021, in a downsized offering for which the company raised $266 million. The shares were priced at $16 each but have had a rough time so far. In 2022 alone, the shares are down by 44%.
That said, the share losses have come against an expanding top-line, with revenues steadily growing in each subsequent quarter. In the latest report, for FQ2, revenue increased by 26.9% year-over-year to reach $150.6 million, edging ahead of the consensus estimate by $3.15 million. There have also been consistent beats on the bottom-line; adj. EPS of -$0.03 beat the -$0.06 expected by the analysts.
Assessing this company’s prospects, JMP analyst Patrick Walravens come down squarely in the bull-camp.
“Overall, we see Sprinklr as an attractive opportunity for long-term capital appreciation for a number of reasons, including: 1) Sprinklr’s AI-powered platform that is designed to listen to and manage customer experience data at massive scale across 36 channels (including TikTok) and has lots of high-value, vertical use cases; 2) the company is pursuing a large market opportunity, which is estimated to be ~$60B; 3) we like the leadership of CEO Ragy Thomas and CFO Manish Sarin, who joined in January and is helping focus the company on profitable growth; 4) we think in a tough macroeconomic environment, Sprinklr is benefiting from a trend to consolidation of solutions,” Walravens wrote.
As such, Walravens rates CXM stock an Outperform (i.e. Buy) while his $22 price target makes room for 12-month gains of a strong 150%. (To watch Walravens’ track record, click here)
Overall, most agree this stock is one to own; the ratings split 6 to 2 in favor of Buys over Holds, providing this name with a Strong Buy consensus rating. At $15.29, the average target implies shares will climb ~74% higher over the one-year timeframe. (See CXM stock forecast on TipRanks)
The next beaten-down stock we’ll look at is NanoString, a specialist in the field of spatial biology. That is, the study of molecules in a two-dimensional or three-dimensional context.
In layman’s terms, the company develops advanced instruments which are used in labs for scientific and clinical research. The company offers 3 main products; the nCounter Analysis System, the GeoMx Digital Spatial Profiler (DSP) and the CosMx Spatial Molecular Imager (SMI) platform.
NanoString also recently unveiled its new AtoMx Spatial Informatics Portal (SIP), an integrated ecosystem with streamlined workflows which corresponds with its other platforms. The commercial launch is expected this fall.
2022 has been brutal for this stock, which is down by 76% year-to-date. The share losses have come alongside real world decline, as exhibited in the latest quarterly statement – for 2Q22. Revenue fell by 4.8% from the same period a year ago to $32.22 million while the losses widened too; EPS of -$0.85 dropped from the loss of -$0.60 in 2Q21. Additionally, the company lowered its outlook; total product and service revenue for the year is now expected in the range between $140 and $150 million, vs. the prior guidance of $150 to $160 million, while the company expects an adjusted EBITDA loss of $75 to $85 million, whereas beforehand NanoString called for a loss of $65 to $75 million.
While investors have voted with their thumbs down this year, Canaccord analyst Kyle Mikson remains fully behind this name.
“We remain bullish on NSTG’s spatial biology opportunity,” the analyst said. “We continue to believe that CosMx and GeoMx (combined with AtoMx) should be complementary going forward. Despite recent ‘self-inflicted’ commercial execution issues, we believe NanoString will be able to right-size its sales force to support its full CosMx launch in 2H22. We believe the shares are highly attractive at current levels.”
Mikson isn’t just predicting a strong future, he’s backing his stance with a Buy rating and a $30 price target that implies ~175% one-year upside potential. (To watch Mikson’s track record, click here)
4 other analysts join Mikson in the bull corner, and one skeptic can’t detract from the Strong Buy consensus rating. The forecast calls for 12-month gains of 152%, considering the average target clocks in at $275. (See NSTG stock forecast on TipRanks)
From one life sciences company to another; Maravai develops and provides essential products utilized for the purpose of new drug development, diagnostics, human disease research and next-gen vaccines.
The last bit is important as Maravai’s products are being widely used in mRNA-based production and Maravai has enjoyed the prominence seen by mRNA technologies in Covid-19 vaccines.
The most frequently used Covid vaccination on a global scale is the Pfizer/BioNTech Covid vaccine, COMIRNATY, which uses Maravai’s CleanCap mRNA capping technology.
This achievement should bolster Maravai’s prospects for success in the 500+ mRNA vaccines and therapies being developed. It has also provided the company with a sales boost (65% of 2020 to 2022e sales are driven by COVID-vaccines).
That sales bump was still reflected in the company’s most recent earnings report – for 2Q22. Revenue rose by 11.5% year-over-year to $242.73 million, while beating the Street’s call by $9.51 million. EPS of $0.53 also came in well above the $0.38 consensus estimate.
That said, Maravai has been unable to withstand the bearish market forces and the shares have tumbled ~55% this year.
There are also questions regarding the future growth trajectory once the Covid tailwind completely subsides. However, this is not a concern for Credit Suisse’s 5-star analyst Dan Leonard, who points out the growing prevalence of mRNA technology.
“The COVID-19 pandemic accelerated the trajectory of mRNA technologies by multiple years, according to our diligence. The pipeline product candidates for Maravai’s raw materials are broad and deep. According to market research by L.E.K., mRNA/cell and gene therapy assets in development are expected to grow 4x from 2022 to 2027. The FDA expects more than 200 cell and gene therapy INDs per year and 10-20 approvals per year (from nine in total today) starting in 2025. Funding for cell and gene therapies companies totaled ~$20B in 2020,” Leonard explained.
“All in, we view it as an attractive market for suppliers, with Maravai most exposed in our coverage,” the analyst summed up.
Conveying his confidence, Leonard’s Outperform (i.e., Buy) rating is backed by a $34 price target, suggesting an 80% upside from current levels. (To watch Leonard’s track record, click here)
Like Kulkarni, other analysts also take a bullish approach. MRVI’s Strong Buy consensus rating breaks down into 6 Buys and zero Holds or Sells. Given the $35 average price target, the upside potential lands at ~85%. (See MRVI stock forecast on TipRanks)
To find good ideas for stocks trading at attractive valuations, visit TipRanks’ Best Stocks to Buy, a newly launched tool that unites all of TipRanks’ equity insights.
Leading crypto exchange Coinbase reported a Q2 net loss of just under $1.1 billion this afternoon, or $4.98 a share, as sales fell more than had been expected and the company’s company’s stock tumbled 6%.
The beleaguered exchange has been hit hard in recent months by a confluence of declining cryptocurrency market conditions, regulatory pushback and investor uncertainty that has dragged its stock price down over 55% since late March.
Coinbase recorded the majority of its $802.6 million in revenue last quarter–over 80%–from transaction fees on sales and exchanges of cryptocurrency. That’s down 61% from the corresponding 2021 quarter and 35% less than Q1.
Analysts had predicted revenue of $868.4 million for the quarter and an adjusted per share loss only about half as severe as reported. In Q2 2021, the company earned $1.6 billion.
The below-consensus revenue may have been reflected rising use of the exchange by customers who aren’t there currency trading, according to Michael Miller, an equity analyst at Morningstar. “Coinbase’s problem wasn’t so much that customers abandoned it — transacting users were essentially flat sequentially — but that there was a shift toward non-traders, such as those involved in staking.”
Despite the flood of red ink, Coinbase has an ace in the hole: its $6.2 billion of cash in the bank, barely changed from Q1. That figure includes $362 million of stablecoin USDC.
“Coinbase is really caught out with its cost structure, and now that crypto prices have come way down, they’re in a position where they do need to cut costs pretty dramatically,” says Miller. “While they are caught out on the costs side, though, they did go into this crypto downturn with a very strong balance sheet.”
The exchange cut costs aggressively last quarter, laying off 1,100 employees, 18% of its workforce, in mid-June and reducing its marketing outlays from a high point last fall (in which it spent $14 million on a single 60-second Super Bowl ad). Operating expenses, adjusted to remove cryptocurrency impairments, fell to $1.48 billion in Q2 from more than $1.5 billion in each of the two previous quarters but were still higher than $1.3 billion a year earlier.
“Expenses haven’t come down much—they were more or less flat sequentially. Coinbase did reduce cost guidance for the rest of 2022, though,” says Miller. “It does sound like they’re comfortable with this level of losses—they were within the guardrails they set. Unless revenues decline further, I wouldn’t expect to see any further layoffs.”
Coinbase’s web engagement fell dramatically, according to data from Simliarweb: visits to coinbase.com fell 45% in June, even while U.S. sites of competitors like FTX showed them more than doubling. Moreover, Coinbase’s weekly web display ads have dropped by over 35% since early June.
“By looking at web traffic and app traffic, you just see a trend towards somewhat of a decline in engagement for cryptocurrency in general,” says David Carr, senior insights manager at Similarweb. “But for Coinbase, the decrease in the percentage of customers using the app on a regular basis and the decrease in the amount of time they spend on the app are signs of lesser enthusiasm.”
Ben Weiss, CEO of crypto financial services and Bitcoin ATM provider CoinFlip, says the market may be overly pessimistic. “I feel that the market is conflating the performance of crypto assets with the companies in the crypto ecosystem, and therefore the reduction in Coinbase stock price is possibly an overcorrection,” says Weiss. “Coinbase is a household name in the crypto space and is extremely competitive among crypto exchanges. While companies must continue to innovate to stay relevant, Coinbase is still extremely well positioned among exchanges to continue to capitalize in the crypto space.”
Coinbase operates as a remote-first company and has no physical headquarters As part of its SEC filing to go public, the company reported 43 million verified users, 7,000 institutions, and 115,000 ecosystem partners in over 100 countries. It also reported net revenue of $1.14 billion in 2020, up from $483 million the previous year. The company also reported a net income of $322 million after posting a loss in 2019.
Out of the $782 billion worth of assets on the crypto market, some $90 billion worth is held on the Coinbase platform. As of 2018, the company offered buy/sell trading functionality in 32 countries,while the cryptocurrency wallet was available in 190 countries worldwide. In a May 2022 Form 10-Q filing, Coinbase stated that “because custodially held crypto assets may be considered to be the property of a bankruptcy estate, in the event of a bankruptcy, the crypto assets we hold in custody on behalf of our customers could be subject to bankruptcy proceedings and such customers could be treated as our general unsecured creditors“.
The “Coinbase Effect” refers to the rise in price of cryptocurrencies listed for sale on a dominant crypto exchange such as Coinbase in the days after the news becomes public. According to Barron’s, the effect of getting a cryptocurrency listed on the exchange plays a big role in what cryptocurrencies gain widespread acceptance.
On February 16, 2018, Coinbase admitted that some customers were overcharged in error for credit and debit purchases of cryptocurrencies. The problem was initiated when banks and card issuers changed the merchant category code (MCC) for cryptocurrency purchases earlier that month. This meant that cryptocurrency payments would now be processed as “cash advances”, meaning that banks and credit card issuers could begin charging customers cash advance fees for cryptocurrency purchases.
Customers who purchased cryptocurrency on their exchange between January 22 and February 11, 2018, could have been affected. At first, Visa blamed Coinbase, telling the Financial Times on February 16 that it had “not made any systems changes that would result in the duplicate transactions cardholders are reporting.” However, the latest statement from Visa and Worldpay on the Coinbase blog clarifies: “This issue was not caused by Coinbase.
In March 2018, Quartz reported that the number of monthly customer complaints against Coinbase jumped more than 100% in January of that year, to 889, citing official Consumer Financial Protection Bureau data, with more than 400 of those categorized as “money was not available when promised”.The article also noted that the company was subsequently increasing its customer service staff to reduce wait times. In December 2021, CNBC reported that Coinbase froze the cryptocurrency GYEN due to a sudden price spike, resulting in many traders losing money.
On July 22, 2022, a former Coinbase product manager, Ishan Wahi, along with Nikhil Wahi (Ishan’s brother) and Sameer Ramani (a friend), was charged in the first-ever insider trading case in cryptocurrency by prosecutors for the Southern District of New York and the Securities and Exchange Commission.According to the complaint filed in SEC v. Wahi, Ishan Wahi allegedly shared information that certain tokens were about to be listed by Coinbase with Nikhil Wahi and Ramani, who then allegedly acted upon that information to make trades for an alleged illicit profit in excess of $1.5 million.
According to federal prosecutors, Ishan Wahi purchased a one-way ticket to India upon being summoned by Coinbase to the company’s Seattle office for a meeting. Wahi was subsequently intercepted by law enforcement from boarding a May 16 flight to India. Coinbase’s chief security officer, Philip Martin, noted that the company provided prosecutors with information from an internal investigation.
A 51% attack doesn’t mean the attacker can send BTC from your wallet or account; it only means the blockchain has been compromised, and double-spending of crypto is imminent. Blockchains like Bitcoin and its contemporaries, with larger mining nodes and hash power, are less likely to be attacked due to the financial cost involved.
Blockchain technology is no longer a new word in this digital era. The name prevalently comes to mind anytime Bitcoin cryptocurrency is mentioned in any discourse. Unfortunately, the connection between blockchain and Bitcoin can’t be ruptured because the Bitcoincryptocurrency brought blockchain to the limelight in 2008.
For clarity’s sake, Bitcoin is a blockchain on its own, while its native cryptocurrency that is used to incentivize miners is BTC—Bitcoin cryptocurrency. The cryptocurrency was birthed through one of the several use cases of blockchain in the finance industry.
Consensus Mechanisms
A consensus mechanism is when the majority agrees on something or disagrees. Imagine you conduct a survey with 100 different people from different locations about how sweet a particular cookie is. If all 100 say it is sweet or otherwise, their opinion is unanimous, which marks a consensus.
The consensus mechanisms employed in all blockchain networks are similar to the example above. In the case of blockchain, miners replicate the audience that took the cookie survey. Back to Bitcoin mining.As mentioned earlier, the consensus mechanism of bitcoin is the PoW, where miners compete to solve complex cryptographic puzzles with their mining machines. Whoever can solve this puzzle faster and produces the winning hash wins the right to add the newly verified transaction data to a block.
Such a validator will be rewarded with the native crypto of the blockchain—BTC.What usually determines who wins the right to fill a new block with transaction data is having a mining machine with a high hash rate—i.e., machines that can produce more hashes per second. This can be achieved by having more machines and combining their mining power or getting machines with higher mining power to mine faster than your competitors.This suggestion can be likened to participating in a raffle where having more tickets increases your chances of winning. Now, what if an unscrupulous or malevolent actor has a higher mining power than other miners? Then, a 51% attack is imminent!
What Is a 51% Attack?
A 51% attack occurs when a malevolent miner in a blockchain network gains control of the blockchain mining power. This means that the miner—in this case, an attacker— will be able to mine faster than other miners because the attacker now controls more than 50% of mining power.
Having 51% control—which is the least percentage required to take over a blockchain network—is ominous.
Difference Between a 51% Attack and a 34% Attack
A 34% attack is known with the Tangle consensus algorithm. The attacker only falsifies the blockchain’s ledger by approving or disapproving transactions. In contrast, the 51% attack gives attackers control of a blockchain such that they can disrupt mining and the entire blockchain.
Implications of a 51% Attack on Blockchain and Bitcoin
When an attacker controls 51% mining power in a blockchain, then the security of such a blockchain has been compromised, leaving the attacker in control of transactions. Below are the implications of what’s bound to happen due to a 51% attack:
Network Disruption by Delaying Validation of Transactions: The attacker disrupts the blockchain network by attacking the miner’s computing resources. In such a scenario, there’ll be a delay in the validation and storage of transactions in a block. As a result, the blockchain is hampered, causing the attacker to process transactions faster than the miners or even prevent another miner from adding blocks.
Double Spending: Double spending occurs when miners spend their crypto twice on a particular blockchain network.How?
Imagine if the attacker had previously purchased a Ferrari 250 GTO with 1,600 BTC; he paid for the car and got the delivery of the vehicle. During a 51% attack on the BTC blockchain, the attacker can reverse the 1,600 BTC transferred to the seller’s wallet such that he keeps the car and the BTC. The BTC can then be spent for another purpose. This is known as double-spending.
Reduction in Miner’s Reward: Since miners are usually rewarded for validating transactions on a blockchain, in the wake of a 51% attack, the attacker steals the shares of other miners, making them earn less than what they’re supposed to earn.
Diminishes Blockchain’s Credibility
A 51% attack on a blockchain network will diminish the credibility of such a blockchain. Both miners and investors will not trust the security framework anymore. This might lead to abandoning the project or some exchanges delisting the crypto from their market.
Below are the examples of blockchains that have suffered a 51% attack:• BSV—Bitcoin Satoshi Vision—was attacked in August 2021• ETC—Ethereum Classic—was attacked thrice in August 2020
• BTG—Bitcoin Gold— was attacked twice; once in 2018 and then in 2020
• GRIN was attacked in 2020, the attacker controlled about 58% of GRIN’s hash rate
i. Limited Hash Power – Blockchains running on the PoW mechanism should limit the hash power of each miner to 50% or lesser. This will pre-empt such an attack
ii. Using PoS or DPoS A PoS- Proof-of-Stake- the mechanism is another consensus mechanism for validating blockchain transactions. It is eco-friendly because no power is needed, and it doesn’t require a sophisticated machine. PoS uses coin owners’ machines to mine crypto. Investors stake their coins in return for an opportunity to validate blocks.DPoS, on the other hand, means Delegated Proof-of-stake. It is a decentralized PoS where the crypto community appoints validators by voting. If a validator is perceived to be compromising the network, they are also voted out by the community.
Conclusion
A 51% attack doesn’t mean the attacker can send BTC from your wallet or account; it only means the blockchain has been compromised, and double-spending of crypto is imminent. Blockchains like Bitcoin and its contemporaries, with larger mining nodes and hash power, are less likely to be attacked due to the financial cost involved.
Rising regulatory scrutiny is damping investor appetite for sustainable bonds, especially those issued by riskier companies. Bonds sold to fund environmentally friendly projects and companies generally fetch higher prices and lower yields than conventional bonds. This “greenium,” though, has been shrinking in recent weeks as global regulators forge ahead on new disclosure rules and investors start to look more closely at companies’ claims about sustainability.
The selloff is sharpest for high-yield sustainable bonds, whose price premium over comparable conventional bonds has nearly halved since early September, dropping to 0.17 percentage point from 0.30, according to ICE bond indexes. The yield on a broad index of sustainable junk-rated bonds has risen to 3.82% from 3.33% over the same period. Yields rise when prices fall.
The greenium for investment-grade bonds has shrunk, too, though more slowly, halving since April to 0.03 percentage point.
Sustainable investing—also known by the acronym ESG for its environmental, social and governance factors—has attracted hundreds of billions of dollars, but until recently there has been little consensus about what qualifies as a green asset. Money managers are increasingly worried about being duped by companies exaggerating their sustainability bona fides. They are also having to prove the claims they make to their investors about how they evaluate green investments.
In a bellwether case, the Securities and Exchange Commission is investigating whether Deutsche Bank AG’s asset-management arm lived up to claims it made about its ESG investing criteria. A whistleblower and internal emails say that only a fraction of its assets went through a sustainability assessment, contrary to the firm’s public statements. DWS has said it stands by its disclosures.
This new scrutiny is prompting some investors to be more careful when assessing sustainable bonds, particularly those sold by lower-rated issuers, which tend to be smaller and disclose less about their businesses, said Tatjana Greil Castro, a credit portfolio manager at Muzinich & Co.
“There is definitely an understanding that you cannot just slap on your tick-box approach,” she said. Market dynamics may be partly to blame, too. Inflows into sustainable-investment funds haven’t kept pace with a flood of new issuances.
Investors put $95 billion into ESG funds in the second quarter, down from $142 billion in the first, according to the latest available data from Morningstar. Meanwhile, issuance of sustainable bonds stayed relatively stable, with $295 billion in the second quarter and $299 billion in the first, according to Bloomberg New Energy Finance.
With less money earmarked for green assets spread across more deals, investors can be choosier about which to buy and can negotiate higher yields.
Sustainable debt sold by higher-rated issuers are still finding strong demand. The yield on the European Union’s first-ever common green bond has fallen from 0.45% when it was issued Oct. 12 to 0.37% as of Wednesday. Investors piled into the U.K.’s debut green bond last month, which priced at a yield of 0.87%.
But corporate borrowers, especially those with lower credit ratings, are finding less appetite for their debt in the secondary market. A green bond issued by Daimler AG was yielding 0.51% on Wednesday, compared with 0.52% for the German auto maker’s comparable conventional bond. In February, the green bond was yielding 0.16 percentage point less.
A green junk bond issued by Ardagh Metal Packaging SA was yielding 2.20% on Wednesday, up from 1.81% in mid-September.
Anna Hirtenstein is a reporter at The Wall Street Journal in London, covering financial markets. She was previously a reporter at Bloomberg in London, an investment banker at Greentech Capital Advisors in Zurich and has also worked as a field correspondent with a focus on oil in Northern Iraq and West Africa.
Environmental Theme Bonds: a major new Asset Class brewing, excerpt from Sustainable Banking – Risk and Opportunity in Financing the Future, edited by Joti Mangat, published by Thomson Reuters 2010
Mathews, Kidney, Mallon, Hughes. Mobilizing private finance to drive an energy industrial revolution. Energy Policy 38 (2010)
Chinese companies once ticked a lot of boxes for investors trying to follow the market’s old adages.
Diversify, they say. Well then, why not look beyond the world’s largest economy to its second? Maybe you’ve got Facebook, Amazon and Google in your portfolio already. Shouldn’t you also be thinking about Tencent, Alibaba and Baidu? You can buy them on Robinhood, after all.
That all sounds promising in a theoretical world. But in the practical one we inhabit, investing in China has become riskier, particularly this summer. In this excellent breakdown, Matt Levine of Bloomberg Opinion explains in terms you will actually understand how opaque it is to own U.S.-listed China stocks.
When you buy shares of a Chinese company listed outside of China, what you are actually buying is “an empty shell that has certain contractual relationships with the Chinese company,” Levine explains.
Sound tenuous? SEC Chair Gary Gensler thinks so. The commissioner worries that Americans just don’t know enough about Chinese companies listed on U.S. exchanges. A few weeks ago, he blocked initial public offerings of certain firms until they boost disclosures of risks posed to shareholders.
This is all coming in the context of some serious developments in China. There are mounting concerns about human rights abuses in Xinjiang and the crackdown in Hong Kong. Both have led to negative views of the country globally and pose ethical and financial dilemmas for investors increasingly thinking about the moral side of investing.
And a Chinese clampdown on capitalism has spooked investors. At its most extreme, it erased $1.5 trillion from Chinese stocks. It has hit Chinese tech companies hard. It’s prompted superstar fund manager Cathie Wood to pare her China exposure. Wood’s ARKK ETF is now sitting with no exposure to shares of companies in the world’s second-biggest economy. Other high profile investors have taken similar steps, including George Soros and Paul Marshall, co-founder of one of the world’s largest hedge funds.
And it’s not just tech. In mid-June, Chinese President Xi Jinping indicated that private tutoring — a huge expense for middle-class Chinese families — should not be such a burden. The country went on to ban for-profit tutoring, a huge deal in the $100 billion education tech sector.
Yet with proof that there is an adage for almost any angle, I offer you another: Buck the consensus view. HSBC Chairman Mark Tucker says investment opportunities in China are “too big to ignore.” And while he wouldn’t recommend Chinese equities in general, one market expert in our latest “Where to Invest” series says he would recommend two ETFs that have exposure to Chinese solar and battery technology.
Where do these adages lead us? Probably to another: Trust yourself, not some old saying. — Charlie Wells
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