“Blame Bitcoin” could be a new perspective if the technology sector continues to decline.
Semiconductor manufacturer
Nvidia
(ticker: NVDA) down 8.1%, at $ 532.94, in recent trading amid a broader path in the tech-heavy
Nasdaq Composite
index. The chip stock stands out as the company released a strong earnings report Wednesday, citing a lift from Bitcoin and other cryptocurrencies-related products.
Payment App
Square
(SQ), meanwhile, also followed its slide, down 4.3%, at $ 227.09. The company’s relatively strong earnings report on Tuesday included investments and operating gains from Bitcoin, and the company said it expects to “double” on the digital coin. That may be putting pressure on the stock, which is down nearly 20% in the last few sessions as Bitcoin prices have plummeted.
Tech is under pressure for other reasons: Steep valuation has made the sector vulnerable to weakness in company forecasts. Rising bond yields pose a risk by squeezing the present value of future cash flows. Big Tech is also a crowded trade that could lose favor as investors look for more cyclical publishing or regions with lower valuations.
But the trading patterns in Nvidia, Square,
Tesla
(TSLA), and other stocks can also signal the impact of Bitcoin growth. Companies are plowing capital into Bitcoin directly and related products and services, expanding their visibility at a time when prices have exceeded more than 350% in the past year. Despite its recent slippage, Bitcoin is still up 67% this year.
Crypto is definitely gathering momentum.
Mastercard
(MA) said this month that it would start supporting cryptocurrencies directly on its network, noting that many consumers are already using cards to buy crypto assets. . But it would still be a stretch to turn Bitcoin into a stable currency for everyday buying, a
Mastercard
the executive noted at a conference Thursday.
“Bitcoin does not behave as a payment instrument,” Mastercard Executive Vice Chairman Ann Cairns said, according to a MarketWatch report. “It’s too volatile and will take too long to move.”
Whether it becomes an asset class or a payment instrument, the rise (and potential collapse) of Bitcoin is ripping through corners of technology, banking and other sectors.
For example, Nvidia released an interesting earnings report, as Barron’s fa-near. But it’s also becoming more of a crypto play.
The company said crypto may have made a positive impact of between $ 100 million and $ 300 million in their quarter. The company is launching a new line of cryptocurrency mining processors, or CMPs, for professional crypto-miners.
“Companies and financial institutions have recently started accepting cryptocurrencies and are showing more signs of staying power,” Nvidia told investors. The new line of CMPs will give the company more transparency about what crypto contributes to revenue, the company said.
Some analysts question the stability of the trend. Piper Sandler’s Harsh Kumar confirmed a fat level on the shares, for example, but warned of Nvidia’s growing popularity regarding crypto.
“With cryptocurrency re-emerging, the interpretation between crypto and major games is upside down,” he writes. “We feel that investors can question the sustainability of these trends, especially with the cryptocurrency issues of the past.”
Square payments app, as mentioned above, is now largely in the Bitcoin debate. While major industry trends look healthy, investors may be concerned that Square is expanding into crypto as prices peak. The company bought $ 170 million of Bitcoin in the quarter, in addition to $ 50 million previously purchased, and is marketing the Cash App as a means of purchasing, storing, and eventually moving with the cryptocurrency.
Wall Street has mixed views on that view. Competitors like it
PayPal
(PYPL) is also plowing into Bitcoin, along with other “neobbank” competitors, notes JMP analyst David Scharf. That raises questions about the long-term “sustainability” of App Cash and whether growth can continue.
In fact, Cash App now accounts for about half of Square’s total profits, and the company is counting on Bitcoin to fuel demand. That makes Square stock a derivative type of Bitcoin; shares have been more closely linked to the price of Bitcoin over the past year, and the relationship is probably only getting tighter.
Square stock may also not fully account for the volatility of Bitcoin, which has made several boom-bust circles. At around 100 Ebitda’s estimated 2022 (earnings before interest, taxes, depreciation, and depreciation), the stock looks full value, according to Scharf, which maintained its Market Performance level.
Jeff Cantwell from Guggenheim took the other side of that debate. It improved Square’s stock to Buy on Thursday, partly on a positive outlook for Bitcoin. “We believe Bitcoin is on a higher long-term path,” he writes, saying it should drive an increase in App Cash usage and other metrics.
He doesn’t see Bitcoin growing as a frontier currency for mainstream buying anytime soon. But that’s next to the point, he notes, as Bitcoin turns into “digital gold” – a store of value and asset class. There are 50 million digital Bitcoin wallets worldwide, a large and growing user base, he notes. Square is doing its part to make Bitcoin mainstream.
Cantwell sees Square stock hitting $ 288. Bitcoin may have to do its part to get the stock there as well.
Write to Daren Fonda at [email protected]