This market is split in two and only one part is worth owning

Jim Cramer at the NYSE, June 30, 2022.

Virginia Sherwood | CNBC

Hardly a day goes by without someone asking me, “Why do you like Jay Powell so much?” He will question whether I am somehow buddies with the Federal Reserve chair, or assume I knew him before he got the job.

Top Wall Street analysts say buy stocks like Apple and Bumble

Apple CEO Tim Cook poses in front of a new MacBook Airs running M2 chips display during Apple’s annual Worldwide Developers Conference in San Jose, California, June 6, 2022.

Peter Dasilva | Reuters

With the brutal 2022 behind us, we look ahead to a year of relatively predictable challenges. This calls for careful investing with a longer-term view. To help the process, here are five stocks chosen by Wall Street’s top analysts, according to TipRanks, a platform that ranks analysts based on their track record.

DoubleVerify Holdings

As its name suggests, DoubleVerify (DV) helps to improve the safety and security of online advertising. A pioneer in this area, the company’s services are employed by customers in the financial services, retail, automotive, travel, telecom, and pharmaceutical sectors. (See DoubleVerify Holdings Stock Chart on TipRanks)

Truist analyst Youssef Squali sees multiple growth opportunities, especially in the social media field. Interestingly, DoubleVerify’s social media client roster includes names such as TikTok, Microsoft (MSFT)-owned LinkedIn, Reddit, Amazon’s (AMZN) Twitch, Meta’s (META) Facebook and Instagram, and YouTube. Looking at this, Squali expects “social media as a channel has unlocked incremental spend for DV to attack within walled gardens, which advertisers value vs. letting these platforms ‘grade their own homework.'”

Moreover, the analyst pointed out that DoubleVerify’s sophisticated software solutions help client companies safeguard their brand reputation while maximizing their return on ad spend. This is particularly important as the digital advertising ecosystem is growing and so is competition. A safe, fraud-free, and appropriately targeted ad environment also helps companies draw traffic.

Squali is “incrementally bullish” on DoubleVerify, with a Buy rating and $36 price target. The analyst stands 92nd among more than 8,000 analysts tracked on TipRanks. Moreover, 57% of his ratings have been profitable, bringing 17.6% returns per rating on average.

Apple

Booking Holdings

Bumble

The challenging economic environment has led to too many problems for the public to be thinking about love. This has left investors swiping left on online dating service provider Bumble (BMBL), leading to a sharp drop in share prices.

Nonetheless, Stifel Nicolaus analyst Mark Kelley maintains a solid relationship with Bumble. “We view Bumble as one of the most innovative companies in the global online dating space offering a compelling and differentiated value proposition for consumers, which we believe will lead to a long runway of paying user/ARPPU growth, and a multi-year operating leverage story,” noted Kelley.

In the last quarter, Bumble launched its message-before-match feature, “Compliments,” which is expected to boost user engagement and thus, support monetization efforts. (See Bumble Blogger Opinions & Sentiment on TipRanks)

Additionally, the analyst believes that Bumble’s mission to prioritize user safety, accountability, and control helps the company stand out in the crowd of competing platforms. Importantly, Kelley also believes that Bumble may be heading into its best days as users increasingly open up to real-life dating after the COVID-19 pandemic disrupted the dating ecosystem since 2020.

Despite reducing the near-term price target to $27 from $30, Kelley maintains a Buy rating on Bumble.

The analyst’s track record shows that his conviction is worthy of consideration. Kelley has a 103rd ranking among more than 8,000 analysts. Moreover, 70% of his ratings have been successful, generating 31.5% average returns per rating.

Perion Network

These 6 Club stocks look reasonably priced as Wall Street shuns high flyers

A Halliburton oil well fielder works on a well head at a fracking rig site January 27, 2016 near Stillwater, Oklahoma.

J. Pat Carter | Getty Images

We’re growing increasingly worried about some richly valued companies in our portfolio, including the likes of Nvidia (NVDA) and Microsoft (MSFT). Expensive stocks remain out of favor on Wall Street — just as they had been for much of last year — and there could be more room for them to fall as recession fears mount.

Here’s how much top tech jobs in California pay, according to job ads

Steve Proehl | Corbis Unreleased | Getty Images

A new law that went into effect this week requires most California employers to disclose salaries on job listings.

The law affects every company with more than 15 employees looking to fill a job that could be performed from the state of California. It covers hourly and temporary work, all the way up to openings for highly paid technology executives.

That means it’s now possible to know the salaries top tech companies pay their workers. For example:

Notably, these salary listings do not include any bonuses or equity grants, which many tech companies use to attract and retain employees.

California is the latest and biggest of the states and cities that have enacted pay transparency laws, including Colorado and New York City. But more than 20% of Fortune 500 companies are based in California, including leaders in technology and media, and advocates hope that California’s new law will be the tipping point that turns posting salary information into standard practice.

In the U.S., there are now 13 cities and states that require employers to share salary information, covering about 1 in 4 workers, according to Payscale, a software firm focusing on salary comparison.

California’s pay transparency law is intended to reduce gender and race pay gaps and help minorities and women better compete in the labor market. For example, people can compare their current pay with job listings with the same job title and see if they’re being underpaid.

Women earn about 83 cents for every dollar a man earns, according to the U.S. Census.

“You’re going to need a lot of different elements in place in order for men and women to get paid the same for the same amount of work and the same experience,” said Monique Limón, the California state senator who sponsored the new law. “And one of those is transparency around salary ranges.”

But the new disclosures under the law might not tell the whole story of what a job pays. Companies can choose to display wide pay ranges, violating the spirit of the law, and the law doesn’t require companies to reveal bonuses or equity compensation.

The law could also penalize ambitious workers who are gunning for more money because of their experience or skills, the California Chamber of Commerce said last year when opposing the bill. Some employers might be wary of posting pay to prevent bidding wars for top talent.

In a comment to CNBC, a Meta spokesperson said, “To ensure fairness and eliminate bias in our compensation systems, we regularly conduct pay equity analysis, and our latest analysis confirms that we continue to have pay equity across genders globally and by race in the US for people in similar jobs.” The firm also noted that it generally pays full-time employees in equity as well as cash.

Apple and Google did not immediately respond to requests for comment.

The new law

There are two primary components to California Senate Bill No. 1162, which was passed in September and went into effect Jan. 1.

First is the pay transparency component on job listings, which applies to any company with more than 15 employees if the job could be done in California.

The second part requires companies with more than 100 employees to submit a pay data report to the state of California with detailed salary information broken down by race, sex and job category. Companies have to provide a similar report on the federal level, but California now requires more details.

Employers are required to maintain detailed records of each job title and its wage history, and California’s labor commissioner can inspect those records. California can enforce the law through fines and can investigate violations. The reports won’t be published publicly under the new law.

Limón said the bill helps narrow pay gaps by giving information to people so they can negotiate their pay better or determine if they are being underpaid for their experience and skills. It will also help the state make sure companies are following existing equal pay laws.

“The reason this is important is that we are not able to address problems that we cannot see,” she said.

Limón said she also hopes that the requirement will help California companies recruit the best talent and compete against other states that don’t require employers to post salaries.

Pay transparency laws could also spur companies to raise wages after they see that rivals are offering higher salaries. Some companies could even choose to post salary ranges on job listings where it’s not required.

Ultimately, she said, helping to ensure women and people of color are getting paid equally will help California’s economy.

“The consequence is not just for an individual; there are economic consequences for the state for people being underpaid,” Limón said. “That means that their earning power and how they’re able to contribute to this economy in California, whether it’s through a sales market, a housing market, through investment, is limited, because they are not being paid equitably.”

Loopholes

The new law doesn’t require employers to post total compensation, meaning that companies can leave out information about stock grants and bonuses, offering an incomplete picture for some highly paid jobs.

For high-paying jobs in the technology industry, equity compensation in the form of restricted stock units can make up a large percentage of an employee’s take-home pay. In industries such as finance, bonuses make up a big portion of annual pay.

“Especially for tech employees, ultimately people want to know how much they’re getting in total compensation,” said Zuhayeer Musa, co-founder of Levels.fyi, a firm focused on recruiting and coaching for technology workers which crowdsources compensation. “Sometimes stock compensation can be more than 50% of your actual total comp.”

Musa said stock from big tech companies is basically liquid because it can be immediately sold on the stock market.

The new law also allows companies to provide wide ranges for pay, sometimes ranging over $100,000 or more between the lowest salary and the highest salary for a position. That seemingly violates the spirit of the law, but companies say the ranges are realistic because base pay can vary widely depending on skills, qualifications, experience and location.

Companies may be open to hiring candidates with a range of experience — starting from entry level to a more senior person — for a particular opening, said Lulu Seikaly, senior corporate attorney at Payscale.

Seikaly said she recommends clients post job listings with a specific seniority level to narrow the potential pay range.

“When we talk to customers, and they ask what do you think is a good-faith range, we tell them that’s a business decision, but the way we would do it, especially from the legal side, if you post by levels, that’s going to cover you a lot more than posting one wide range,” Seikaly said.

Some California companies are not listing salaries for jobs clearly intended to be performed in other states, but advocates hope California’s new law could spark more salary disclosures around the country. After all, a job listing with an explicit starting salary or range is likely to attract more candidates than one with unclear pay.

“I was telling some folks this morning that pay transparency right now is kind of the exception,” Seikaly said. “Give it five to 10 years, I think it’ll end up being the norm.”

Gender pay gap remains despite more women entering the work force

Traders who bet against stocks made a killing in 2022, as short sellers netted $300 billion

Traders on the floor of the NYSE, June 24, 2022.

Source: NYSE

Traders who shorted stocks won big in 2022, according to S3 Partners.

Shorted stocks had a return of 30.8% in 2022, said Ihor Dusaniwsky, the firm’s managing director of predictive analytics. That means short sellers outperformed the broader market, which suffered its biggest losses since 2008. The Dow Jones Industrial Average, S&P 500 and Nasdaq Composite lost 8.8%, 19.4% and 33.1%, respectively, last year.

U.S. short sellers tallied $300 billion in mark-to-market profits on average short interest of $973 billion, Dusaniwsky wrote.

But even with the huge win in 2022, short sellers still lag in recent history. In the past five years, an average annual return for short sellers was a loss of 4.4% while the Dow gained 6.8%, the S&P 500 rose 9.3% and the Nasdaq climbed 12.5%.

How short holdings performed over the last 5 years

Dow return (%) S&P 500 return (%) Nasdaq return (%) Short return (%)
2018 -5.6 -6.2 -4.7 8.9
2019 22.3 28.9 35.2 -22.1
2020 7.3 16.3 43.6 -27.1
2021 18.7 26.9 21.4 -12.6
2022 -8.9 -19.4 -33.1 30.8
5-year average 6.8 9.3 12.5 -4.4

Source: S3 Research

When an investor sells a stock “short” they borrow shares from a broker and sell them in hopes of buying the stock back later at a lower price. It’s a tactic that does best when the broader market is hurting. Short seller returns came in below the major indexes when the market gained value in 2019 through 2021, but beat the averages when they ended the year down in 2018.

It’s worth noting that the total amount shorted last year was below 2021, when the $1 trillion threshold was broken, but higher than in 2018 through 2020.

Short sellers still needed to be good stock pickers in 2022 as different sectors and individual holdings could produce vastly different results, Dusaniwsky said.

For instance, the best sector to short last year was beat down communication services stocks, which produced a return on shorted holdings of 56.7%. Energy was the worst, and posted a 28% loss on shorted holdings, S3 Partners said.

Short- and long-term performance are typically inversed. That’s because investors usually move short on holdings that they expect to lose value, so energy — which was the only winning S&P 500 sector in 2022 — would not be a target for shorting as investors watched share values rise despite the broader market’s decline.

And choosing sector orientation is “only half the battle” given the variety of stocks within each one. Within consumer staples, for example, Beyond Meat had the biggest return on short selling at 128.2%. French fry producer Lamb Weston was the least profitable in its sector, and lost 43.9%.

Carvana, which was beat down as used car demand slid, had the best short performance of all stocks with at least $100 million in short interest, recording a 377.6% gain.

On the flip side, Madrigal Pharma was the worst to short. Bets against the company lost 345.4%. The stock rallied in December on the back of well-received drug trial data.

Microsoft drops after UBS analysts say company faces cloud weakness

A sign for Microsoft Corp. at the company’s office in the central business district of Lisbon, Portugal, on Tuesday, Dec. 27, 2022.

Zed Jameson | Bloomberg | Getty Images

Microsoft shares closed down 4% on Wednesday while the broader tech market rallied after analysts at UBS said the software company faces weakness, particularly in the cloud.

Analyst Karl Keirstead downgraded Microsoft to neutral from buy, writing that the latest round of field checks into the business lowered the bank’s confidence in the stock. Keirstead pointed to concerns at Azure, Microsoft’s cloud computing platform, and Office 365, the company’s family of productivity software.

The analyst said Office 365, which has been a “remarkably steady machine of late,” could see slower revenue growth in 2023, while Azure is entering a “steep growth deceleration” that could be worse in 2023 and 2024 than investors are expecting. 

Microsoft provides year-over-year growth for Azure and other cloud services but doesn’t give a dollar figure, nor does it specify how much of the growth comes just from Azure. The Azure and other cloud services segment also includes, among other things, enterprise mobility and security, or EMS, tools that can be sold separately.

Cloud rival Google put together an estimate of Microsoft’s Azure business, based on a leaked Microsoft document and some extrapolation of other market data. The Google analysis, which CNBC viewed last month, shows Azure ending the 2022 fiscal year with an operating loss of almost $3 billion, narrowing from a loss of more than $5 billion the prior year.

Other tech stocks rose Wednesday, with Apple, Tesla and Meta closing up between 1% and 5%.

— CNBC’s Michael Bloom contributed to this report.

More tech layoffs are coming after Salesforce’s 10% cut

Jim Cramer gives his thoughts on Salesforce layoffs

CNBC’s Jim Cramer on Wednesday warned investors that the tech industry will likely see more layoffs due to continuing macroeconomic headwinds.

“There are so many tech companies with bloated payrolls that are still trying to grow rapidly, overpaying for new employees, and they fear that layoffs will mean that their time in the sun is over,” he said, adding, “They don’t seem to understand that their time in the sun ended over a year ago.”

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Salesforce's cost-cutting plan is a much-needed move for an economic downturn

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His comments come after Salesforce said Wednesday that it is slashing 10% of its staff and curtailing office space. The cloud-based software firm had over 79,000 employees as of December.

Shares of Salesforce rose 3.57% on Wednesday.

The layoffs, part of a broader restructuring plan at Salesforce, are the company’s latest headcount reductions after it let go of hundreds of employees in November.

Other tech firms, including Meta Platforms, Netflix and Lyft, culled their workforces to cut costs last year as persistent inflation, the Federal Reserve’s interest rate hikes and normalizing demand from the height of the pandemic continue to dog the formerly burgeoning industry. 

Cramer said that while the industry is likely to see more cuts this year, investors should refrain from becoming overly optimistic about how tech companies and their stocks will fare once more employees are laid off.

“I’m saying that this decline won’t be as bad as the 2000 and 2001 [recession]. It won’t be that. Nor am I saying that tech stocks can rally endlessly on cost cuts,” he said.

Disclaimer: Cramer’s Charitable Trust owns shares of Salesforce and Meta Platforms.

Jim Cramer says more tech layoffs are coming after Salesforce cuts 10% of its headcount

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Apple, Amazon lost a ‘staggering’ $800 billion in market cap in 2022

Sometimes a little perspective is needed to really drive home the magnitude of a specific statistic. That’s the case with the gigantic losses tallied by Apple and Amazon last year.

The two stocks were the biggest losers of market cap in 2022. Apple shed $846.34 billion in value and Amazon lost $834.06 billion. Market cap measures the combined value of all of a company’s stock.

The value shed by each of the two companies dwarfs the total size of other household tech stocks. Bespoke Investment Group called the numbers “staggering” in a tweet.

Amazon’s stock sunk as the company’s earnings floundered and fourth-quarter guidance was dispiriting. Its performance was in line with the tech sector more broadly, which has been hurt by rising interest rates, slowing internet advertising and other factors.

BTIG's Jonathan Krinsky offers the technical take on Apple and Tesla

Despite being one of the few big tech names to avoid an earnings plunge, Apple still struggled as questions swirled around the popularity of its new products and it faced difficulty with iPhone 14 shipments during the holiday season due to Covid-19 restrictions at its main China factory.

The personal tech titan also has slowed the pace of hiring along with others in the sector as concerns grew over a potential recession, which could dilute demand as consumers delay purchases of big-ticket items to save money. Apple stock shed 3.7% in trading Tuesday — hitting a 52-week low as its market cap fell below $2 trillion for the first time since May.

But what can get lost in the data is just how large these two companies are within the stock market. Compared with peer Meta Platforms‘ $315.56 billion year-end market cap, Amazon was more than twice the size at $856.94 billion. On Dec. 30, Apple was multiple times that size at $2.067 trillion.

In fact, what each of the two stocks shed in one year alone is more than double the size of Meta’s complete market cap.

That $830 billion loss alone is the equivalent of

My worldview for the first half of 2023 and stocks that will win

A woman poses for pictures in front of the giant, seven-foot-tall numerals for “2023”, as it arrives for the December 31 Times New Year’s Eve celebrations, at Times Square in New York City, U.S., December 20, 2022. 

Eduardo Munoz | Reuters

Where did 2022 go so wrong and how can 2023 go right?

I am constantly trying to show you how money managers work because — unlike almost everyone in “the business” — you can cherry-pick the parts that best suit your investing strategy. My goal for the Club has been simple and true: to replicate what I did as a successful money manager so you can do the same.

Nasdaq closes out its first four-quarter slump since dot-com crash

The once high flying tech sector has endured a heavy selloff this year amid concerns that the sector’s growth could be curtailed by rising interest rates. The tech-heavy Nasdaq Composite is down more than 14%.

Chris Hondros | Newsmakers | Getty Images

A lot has changed in technology since the dot-com boom and bust.

The internet went mobile. The data center went to the cloud. Cars are now driving themselves. Chatbots have gotten pretty smart.

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A long-overdue reality check for tech stocks has reset the bar for 2023

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But one thing has remained. When the economy turns, investors rush for the exits. Despite a furious rally on Thursday, the tech-laden Nasdaq finished in the red for a fourth straight quarter, marking the longest such streak since the dot-bomb period of 2000 to 2001. The only other negative four-quarter stretch in the Nasdaq’s five-decade history was in 1983-84, when the video game market crashed.

This year marks the first time the Nasdaq has ever fallen all four quarters. It dropped 9.1% in the first three months of the year, followed by a second-quarter plunge of 22% and a third-quarter decline of 4.1%. It fell 1% in the fourth quarter because of an 8.7% drop in December.

For the full year, the Nasdaq slid 33%, its steepest decline since 2008 and the third-worst year on record. The drop 14 years ago came during the financial meltdown caused by the housing crisis.

“It’s really hard to be positive on tech right now,” Gene Munster, managing partner of Loup Ventures, told CNBC’s Brian Sullivan on Wednesday. “You feel like you’re missing something. You feel like you’re not getting the joke.”

Tech has been like a horror show this year, says Wedbush's Dan Ives

Other than 2008, the only other year worse for the Nasdaq was 2000, when the dot-com bubble burst and the index sank 39%. Early dreams of the internet taking over the world were vaporized. Pets.com, infamous for the sock puppet, went public in February of that year and shut down nine months later. EToys, which held its IPO in 1999 and saw its market cap grow to almost $8 billion, sank in 2000, losing almost all its value before going bankrupt early the next year. Delivery company Kozmo.com never got its IPO off the ground, filing in March 2000 and withdrawing its offering in August.

Amazon had its worst year ever in 2000, dropping 80%. Cisco fell 29% and then another 53% the next year. Microsoft plummeted by more than 60% and Apple by over 70%.

The parallels to today are quite stark.

In 2022, the company formerly known as Facebook lost roughly two-thirds of its value as investors balked at a future in the metaverse. Tesla fell by a similar amount, as the carmaker long valued like a tech company crashed into reality. Amazon dropped by half.

The IPO market this year was non-existent, but many of the companies that went public last year at astronomical valuations lost 80% or more of their value.

Perhaps the closest analogy to 2000 was the crypto market this year. Digital currencies Bitcoin and ether plunged by more than 60%. Over $2 trillion in value was wiped out as speculators fled crypto. Numerous companies went bankrupt, most notably crypto exchange FTX, which collapsed after reaching a $32 billion valuation earlier in the year. Founder Sam Bankman-Fried now faces criminal fraud charges.

The only major crypto company traded on the Nasdaq is Coinbase, which went public last year. In 2022, its shares fell 86%, eliminating more than $45 billion in market cap. In total, Nasdaq companies have shed close to $9 trillion in value this year, according to FactSet.

At its peak in 2000, Nasdaq companies were worth about $6.6 trillion in total, and proceeded to lose about $5 trillion of that by the time the market bottomed in October 2002.

Don’t fight the fed

The 'tech is dead' narrative will only last short term into 2023, says SVB's Shannon Saccocia

The tunnel she’s describing is the continuing rate increases by the Fed, which may only end if the economy enters a recession. Either scenario is troubling for much of technology, which tends to thrive when the economy is in growth mode.

In mid-December, the Fed raised its benchmark interest rate to the highest in 15 years, lifting it to a target range of 4.25% to 4.5%. The rate was anchored near zero through the pandemic as well as in the years that followed the financial crisis.

Tech investor Chamath Palihapitiya told CNBC in late October that more than a decade of zero interest rates “perverted the market” and “allowed manias and asset bubbles to build in every single part of the economy.”

Palihapitiya took as much advantage as anyone of the cheap money available, pioneering investments in special purpose acquisition companies (SPACs), blank-check entities that hunt for companies to take public through a reverse merger.

With no yield available in fixed income and with tech attracting stratospheric valuations, SPACs took off, raising more than $160 billion on U.S. exchanges in 2021, nearly double the prior year, according to data from SPAC Research. That number sank to $13.4 billion this year. CNBC’s Post-SPAC index, comprised of the largest companies that have debuted via SPACs in the last two years, lost two-thirds of its value in 2022.

SPACs slumped in 2022

CNBC

‘Bargain basement’ shopping

The IPO market is as bad as it was in 2001, and quick improvement is unlikely, says Bullpen's Davidson