Market Movers (Issue #9)
Market Movers (Issue #9)
Where does Facebook go from here?
Good morning, investors!
Welcome to Market Movers, our coverage of companies making big splashes in the stock market.
“Uppers” represent stocks that recently experienced upward price momentum, while “downers” have faced downward price pressures.
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Without further ado…
Uppers
Li-Cycle (LICY) recovers and recycles lithium-ion batteries. Here’s an elementary description of its recycling process: the company takes end-of-life batteries and battery-related waste, turns them into a powder-like substance (known as black mass), and processes them into reusable end products that can be sold back into the battery supply chain.
Considering the world’s reliance on these types of batteries (e.g., electric cars, smartphones, power tools, etc.), Li-Cycle’s services could be in high demand down the road.
That’s why shares of Li-Cycle are up 6.5% since completing its SPAC merger in August.
Although Li-Cycle got $580 million of gross proceeds from its SPAC merger (and another $100 million last week through convertible notes with Koch Strategic Platforms), it’s still a small company that doesn’t generate much revenue yet.
Through the first nine months of its FY21, Li-Cycle’s total revenue was a hair under $3 million — compared to about $27 million of operating expenses.
That said, it’s early. The EV race is, at this point, a marathon considering most automakers don’t expect to offer all-electric lineups until 2030 and onward. Once that comes to fruition, the EV industry’s growth could bolster Li-Cycle’s bottom line — but that’s a ways away.
Shares of LICY closed at $11.15 on Thursday.
SVB Financial (SIVB) is also known as Silicon Valley Bank, which should give you a pretty good idea of its business model. Self-labeled as “the Bank of the Innovation Economy,” SVB provides financial services to companies within the technology, life science and healthcare, private equity and venture capital, and premium wine industries.
Over the last year, shares of SIVB are up 143.6%.
Although SVB has been an active lender for nearly 40 years, its business has boomed since the start of 2020. Average total client funds (including deposits and investments) were $146.7 billion in FY19. During Q2 of this year, that figure is up to $308 billion.
Shareholders have benefitted from SVB’s growth too; consensus EPS estimates stand at $31.28 for FY21 — up from $22.87 in FY20.
Price targets for SVIB are all over the board though, from a low of $574 to a high of $841. As of Thursday’s close, shares of SVIB were $665.56.
Nucor (NUE) is one of the largest steel manufacturers in North America, recycling 17.8 million gross tons of scrap steel last year.
2021 has been kind to the steel industry — even in spite of a recent pullback. Steel futures prices have ballooned from $633 to $1,880 over the last 12 months. On top of that, steel companies are also poised to benefit from the proposed $1 trillion infrastructure bill (whenever it passes).
And share prices have risen as a result — NUE is up 88.4% this year. That’s still only 4.6 times its estimated FY21 earnings.
As of Thursday’s close, shares of NUE were $98.95.
Downers
Facebook (FB), one of the eldest social media platforms, couldn’t escape our list this week.
Shares of FB are down nearly 13% over the last month. Why? Well, Facebook is the latest company to disprove that all press is good press.
It started with a series of articles by the Wall Street Journal, such as:
“Facebook Says Its Rules Apply to All. Company Documents Reveal a Secret Elite That’s Exempt”
“Facebook Tried to Make Its Platform a Healthier Place. It Got Angrier Instead”
“Facebook Knows Instagram Is Toxic for Teen Girls, Company Documents Show”
The source of these damning allegations would eventually come to light in the form of a whistle-blower — Frances Haugen, a former Facebook product manager. Earlier this week, Haugen outlined troubling, behind-the-scenes activity to Congress. Here’s an excerpt from her testimony:
“I’m here today because I believe Facebook’s products harm children, stoke division, and weaken our democracy.”
Although Mark Zuckerberg’s response post from his personal profile received more engagement than I’ve ever seen, a global outage across Facebook, Instagram, and Whatsapp on the same day as the testimony didn’t help matters.
As of Thursday’s close, shares of FB were $329.22.
Lightning eMoters (ZEV) designs and manufactures zero-emission vehicle fleets, such as school buses, delivery vans, and ambulances. Surprise, Lightning eMoters is another electric vehicle company that merged with a SPAC to go public.
In August, Lightning eMoters announced a strategic partnership with Forest River, a Berkshire Hathaway company and the largest shuttle bus manufacturer in North America. Lightning will build electric powertrains and provide charging products and services to Forest River over the next 4.5 years. The estimated value of the agreement is up to $850 million.
ZEV jumped from $6.41 to $11.60 as investors reacted to the news. But that didn’t hold for long, as shares have dipped back to $7.93 since then — it's hard to justify a one-day jump of 81%, especially for a severely unprofitable company. In the second quarter of 2021, Lightning eMoters reported $5.9 million of revenue and a net loss of $46.1 million.
Corsair Gaming (CRSR) designs and manufactures gaming accessories, components, and equipment (e.g., keyboards, headsets, controllers). Last year was a good year to be in the industry.
Stay-at-home mandates translated to increased gaming during the pandemic. One study estimates that the gaming market generated $177.8 billion during 2020 — a 23% increase relative to 2019.
Naturally, Corsair raked in profits too — net revenue increased from $1.1 billion in FY19 to $1.7 billion in FY20, while the company turned a profit of $103 million after generating losses for the previous two years.
Corsair smashed expectations in 2020 and continued to do so in Q1 of 2021. But it wasn’t enough. Corsair shares are down nearly 50% since last fall.
Why?
In this case, there may have been too much investor interest for Corsair. (At least, too much too quickly.)
On its IPO day in September, CRSR opened at just over $15 a share. Over the next two months, it escalated as high as $51.37. The inflated price tag attracted plenty of short-sellers, which have profited handsomely from the stock’s gradual descent. As of last month, roughly 29% of CRSR’s public shares were shorted.
Despite the short interest, Wall Street analysts are still bullish on Corsair with a consensus price target of $39.67. Shares of CRSR closed at $26.13 on Thursday.
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