Could the success of the reopening cost costs?
Bank of America analysts drew attention to that question Monday in a note upgrading Booking Holdings and lowering Pinterest and Snap, citing changing tides on the interest rate front that could diminish valuations of stay-at-home stocks.
“This is not a phone call that Snap or Pinterest will miss estimates,” the note said. “This is a call that stocks could be tied and that we have better ideas to reopen.”
Booking Holdings ended Monday with a drop of nearly 2.5%, reversing its all-time high on Wednesday. Pinterest was down almost 1%. Snap lost less than half of 1%.
“We are… optimistic about the reopening, but I think we would disagree with the report, which we don’t think is at the expense of some of these high-growth companies,” technical analyst Ari Wald of Oppenheimer told CNBC. Trading Nation on Monday.
Instead, it will likely come at the expense of sectors that pay more dividends and are less volatile, making Pinterest and Snap the long-term winners, he said.
As for Booking Holdings, “it mainly traded in a very broad range – apart from that Covid collapse – of between about $ 1,600 and $ 2,200 for much of the past four years,” said Wald.
“Now, one year after the market’s significant bottom, entering the second year of the bull market, we see more stocks starting to break out, including Booking, breaking above the top of that range,” he said. “It could be viewed as more positive than not as long as that outbreak is $ 2,200 in support.”
Booking closed at $ 2,231.89 on Mondays.
Challenges remain on both sides of Bank of America’s call, despite improved estimates surrounding the reopening, Chantico Global founder and CEO Gina Sanchez said in the same interview.
“About 20% of travel is business and 80% is leisure. Bookings have about the same percentages in their earnings,” she said. “Assuming their entire earnings base will get such a boost in 2021 and 2022, Booking actually looks cheap. But assuming 20% of their earnings portfolio is lagging, it can actually just be fairly appreciated. “
The fate of Pinterest and Snap will most likely depend on the investment landscape, said Sanchez, also chief market strategist at Lido Advisors.
“The bigger challenge out there… really comes with their profitability and whether they can really build profitability,” she said. “The fly in the ointment is that interest rates are going up. And as interest rates go up, investors are really weighing valuations and I think fundamentals are going to come into play.”
While Sanchez expected investors to prefer “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 matters, and so I agree with Bank of America there,” she said.
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