what happened
Tech stocks had a good day on Thursday as investors started to become more bullish on the future of the industry.of NASDAQ Composite rose 0.9% at 2:20 p.m. ET, Dow Jones Industrial Average When S&P 500 with wide margins.
Stocks in companies that offer business-to-business software as a service were some of the biggest winners. MongoDB (MDB 7.06%) jumped 9%, Atlassian (team 8.32%) 10.3% increase at peak, data dog (DDOG 9.26%) increased by 10.2%, hubspot (Hub 6.43%) increased by 6.6%, Wix.com (Wicks 4.07%) increased by 5.4%. The stock prices of each stock retreated slightly from their highs in the morning, but were still up significantly on the day.
So what
In general, there is a ‘risk’ in trading today, which broadly supports such high volatility stocks. But there is some bright news for the industry as well. MongoDB reported earnings on Tuesday, with quarterly earnings up 47% to his $333.6 million. This shows that enterprise customers are still spending more. But the company lost his $84.8 million, or $1.23 per share, so financials aren’t a long-term situation.
From tech stocks that are likely helping the market, we see two trends that investors are watching. One is that growth looks pretty strong from recent earnings reports like MongoDB. This suggests that the market may have overreacted to both rising interest rates and fears of a recession.
We’ve also seen many tech companies cut headcount as investors seek better profitability. That may be what traders are speculating on today. MongoDB hasn’t done that and has actually announced plans to adopt it, but the theme is consistent. If a company can grow while cutting costs, it will have a positive impact on earnings and stock price in the long run.
It is shown below that all five of these companies are able to turn losses into gains by taking advantage of modest cost savings.
MDB Net Income (TTM) Data by YCharts
So
With most tech stocks crashing this year, it’s not uncommon to see a regular big pop on good news or speculation that the future is better than expected. But investors shouldn’t get too excited about today’s move.
From the chart above, we can see that all five of these companies have suffered huge losses, and even if their revenues continue to grow, it will affect their business. This is the balance that growth stock investors should consider heading into 2023.
It’s entirely possible that the past year’s stock market sell-off has been overdone and tech stocks are on the rise. But I think we need to see more evidence of both earnings and profitability growing before this move becomes sustainable. Not improved.
Travis Hoium has no positions in any of the mentioned stocks. The Motley Fool has positions and endorses Atlassian, Datadog, HubSpot, MongoDB, and Wix.com. The Motley Fool’s U.S. headquarters has a disclosure policy.