Why Shopify, Pinterest, and Block Stocks Are Soaring On Monday

what happened

With the first half of the year winding down, 2022 continues to challenge investors and consumers alike. Rampant inflation, “us or not” recession, and an ongoing bear market have created a perfect storm of macroeconomic issues. Everyone is analyzing tea leaves and economic indicators, looking for signs that the worst may be behind us.

With that as background, investors are hoping for a number of economic reports that suggest there may be light at the end of the tunnel, providing a tailwind for some of the more battered tech stocks. E-commerce platform provider Shopify (a store 3.57%) Jumped 7.5%, the visual discovery engine Pinterest (pins 11.61%) rose 4.1%, and roadblock (square foot 1.65%) It rose as much as 3.9%. By the end of the trading day, the trio was still trading higher, up 4.7%, 2.7% and 2.3%, respectively.

While the usual checks of all sources found nothing in the way of specific company news driving the gains, it is possible that investors were feeding the bottom for rickety growth stocks that have fallen a lot. As the day drew to a close, there were other clues at least One of those options was fine.

so what

The US economy experienced its second consecutive quarter of economic contraction, which technically fits the definition of a recession – but not all economists agree on this. Some argue that a strong labor market and low unemployment provide evidence that this “recession” is an anomaly, as these indicators provide evidence that the economy is stronger than some believe.

Another indication that things are not as bad as they might seem is a report by the Institute of Supply Management. The data revealed that even with the growth of manufacturing slow downis still expanding for the 26th consecutive month, a measure that also argues against a recession.

Finally, the Federal Reserve raised interest rates by 0.75% last week, marking the second increase in its volume in several months. However, the language used by Fed Chairman Jerome Powell has changed, and it no longer refers to automatic rate increases in the coming months (focus mine). “With the monetary policy stance tightening, this is likely to become appropriate slow down the pace increases As we assess how our cumulative policy adjustments will affect the economy and inflation, “this indicates that sufficient progress has been made, and deserves a pause before further action is taken.

What now

One common thread that unites these three companies is the exponential growth they experienced at the height of the pandemic, followed by a sell-off caused by buyer’s remorse among investors with a short-term view.

Shopify has seen triple-digit growth as shoppers flock to e-commerce sites while avoiding many traditional retailers. Consumers have avoided large social gatherings and instead sought new leisure activities with the inspiration provided by Pinterest. Block is one of the original fintech providers, and since digital and contactless payments have become the norm rather than the exception, this has led to the company’s strengths.

With things returning more or less to normal, each of these disruptive factors has seen growth return to historical averages, prompting fair-weather investors to flee for the exits. Just last week, Shopify CEO Tobi Lütke admitted that even he thought the accelerated adoption of e-commerce would have a longer shelf life.

However, investors should not sleep on any of these companies, as each one is a leader in its own industry or niche. Shopify is the leading supplier of tools that help merchants sell their goods and services online. Pinterest is the leading visual discovery engine for people looking for social media and inspiration without all the drama. Block revolutionized the payments space for small businesses with its Square credit card reader and continues to be an industry-leading force.

We have early evidence that investors who stuck to Pinterest made the right call. After the market closed on Monday, the company reported revenue and user numbers that held up better than many investors had expected, sending shares up as much as 20% in after-hours trading.

Finally, each of these stocks is a relative bargain. Shopify, Pinterest, and Square currently trade with nine, five and two consecutive sales for 12 months, respectively. While some see this as still a bit frothy, these valuations are near historic lows. Moreover, given their strong growth and secular tailwinds driving each of these industries, some might argue that they are bargains at their current prices.

Danny Vena has positions at Block, Inc. and Pinterest and Shopify and has the following options: long January 2023 calls worth $1,140 on Shopify and long January 2023 calls worth $1,160 on Shopify. Motley Fool has positions at Block, Inc. and Pinterest and Shopify and recommend it. Motley Fool recommends the following options: long January 2023 calls at $1,140 on Shopify and short January 2023 calls at $1,160 on Shopify. Motley Fool has a disclosure policy.

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