Dmitry Balyasny has taken his multi-strategy hedge fund Balyasny Asset Management (BAM) to many billions in assets in sixteen years. From “humble” beginnings that began in a modest Chicago space to a scope extending beyond 90 teams that love to take “misunderstood situations” in a market that is constantly shifting, the billionaire guru has a real knack for macro investment trading. In terms of coupling fundamentals with quant trading prowess, how do tech stocks like GoPro Inc (NASDAQ:GPRO), Shopify Inc (US) (NYSE:SHOP), and Tesla Inc (NASDAQ:TSLA) come out under Balyasny’s smart gaze? Not so well. The guru either axing entirely or all but taking a hatchet to the key tech stocks in his latest quarterly move.
It is worthy of note that BAM is a firm that is bent on managing the risk factor of trades, all while looking out for which moves will yield the most promising long-term gains. Each of BAM’s teams eyes the fundamentals of choice stocks, a strategy that has served to help the firm now reign over $12.6 billion in assets. In largely ETF-driven trading, Balyasny pinpoints the need to judge make-or-break catalysts to best pick trades that will lead to a real pay-off. For the man who has been trading since the early ’90s at Schonfeld Securities, active investing in hedge fund firms by the end of the ’90s, and founding his own by the end of 2001, Balyasny did not achieve his pile of billions without playing it smart in a cutthroat environment. The guru cares about surviving, and so far, he has done quite well for himself and his firm that now boasts over 500 employees across the world.
Let’s see how Balyasny’s alpha-driven, value-seeking steps have filled the bill:
GoPro Gets the Boot
Second quarter was time for GoPro to be flushed out completely, as BAM pulled the plug on all 125,000 shares remaining in its former position that were worth $1,088,000. With GoPro investors getting antsy yesterday, sending shares on a 6% downturn on the fierce heels of Alphabet’s new artificial intelligence (AI) camera branded as “Clips,” Balyasny could be breathing a sigh of relief for his withdrawal.
However, is it so cut and dry as to say Google Clips will be a direct competitor to GoPro’s product lineup? After all, Clips is designed for families who want to capture moments with their children and pets; keep in mind that GoPro’s Hero camera contenders for market share appeal to a consumer who lives for moments that are less about sentimentality and far more about sporty action. The targeted audience for both could end up being quite different, leaving room for both tech players to compete and succeed.
Sure, Google offers an enticing family appeal with AI facial recognition letting the camera take pictures for its users, memorizing important faces to record key memories while letting people still fully live in these moments. However, GoPro’s Hero5 Session has 4Kvideo recording capabilities ranging to 30 frames per second, with 10 megapixel-saturated images coupled with burst rates scaling to 30 frames per second, and a just-announced Hero6 ready to take 4K recording to capture 60 frames per second. With manual controls, and sports-minded users able to operate the app with or without remote as well as by simple voice command, bulls would contend not to steal away from GoPro’s corner so abruptly.
Most on the Street are divided when it comes to this action camera maker, with TipRanksanalytics demonstrating GPRO as a Hold. Out of 8 analysts polled by TipRanks in the last 3 months, 1 is bullish on GoPro stock, 5 remain sidelined, and 2 are bearish on the stock. With a loss potential of 8%, the stock’s consensus target price stands at $8.88.
Shopify’s Almost a Goner
Shopify has little hope left from where Balyasny, as he guided his hedge fund firm to ditch 91% of its holding, to the harsh tune of 71,717 shares, down to just 7,900 shares worth $687,000.
With the stock taking a beating in the market this week, it appears the billionaire is counting his blessing for shedding most of his stake when he did. Shopify shares continued to fall almost 3% yesterday following Wednesday’s 12% crash after word got out that the Canadian e-commerce platform made it on short seller Citron Research’s hit list as “the hottest new get rich quick scheme on the Internet.” Citron’s Andrew Left raises an eyebrow on dubious beliefs of millionaires-in-the-making under Shopify’s umbrella, going as far as to juxtapose the platform against Herbalife- a company with a target on its back for underhanded industry dealings.
Casting negative publicity on the company, Left suggested a price target of $60 for SHOP, marking a 40% downside from where the stock is currently trading, promptly sending the stock into a falling knife tumble.
However, top analyst Colin Sebastian at Baird dismisses Left’s bearish contentions as “off base,” arguing investor apprehension in the aftermath translates to a solid “buying opportunity” for bulls willing to brave the gamble.
Making a bullish case for the platform, Sebastian argues: “First, we view the comparison with Herbalife as clearly misleading, as Shopify is not a multi-level marketing company… Second, and more to the point, our survey of Shopify ads today indicate very few (1 out of 20) contain the word millionaire, whereas the vast majority of the marketing campaigns are focused on easy online store set-up, building a brand, selling on Facebook, or creating an online shop […] Third, the short call on valuation is based on the long-standing view among some investors that the non-subscription part of Shopify’s revenues (Merchant Solutions) deserves a lower multiple, […] We agree that this part of Shopify could be valued differently, however, we would note that both segments of the business are somewhat interdependent, and represent a fixed and variable component to revenues for a more complete end-to-end platform offering that align Shopify’s interests and incentives with their customers.”
As such, the analyst reiterates an Outperform rating on SHOP stock with a $110 price target, which implies a 10% upside from current levels.
Colin Sebastian has a very good TipRanks score with a 78% success rate and a high ranking of #17 out of 4,698 analysts. Sebastian realizes 24.5% in his annual returns. When recommending SHOP, Sebastian yields 80.9% in average profits on the stock.
Credit Suisse analyst Michael Nemeroff sounds off echoing Sebastian’s bullish conviction, believing Left’s bearish argument is a “flawed” one, maintaining an Outperform rating on shares of SHOP with a $95 price target. (To watch Nemeroff’s track record, click here)
“Were it not for the -11.6% decline in SHOP’s shares today, we wouldn’t have even bothered to comment on it,” cheekily writes Nemeroff, who surmises: “We continue to recommend investors buy SHOP shares due to: (1) the company’s integrated cloud-based commerce platform; (2) the secular trend towards eCommerce and convergence of multiple retail sales channels (digital and brick-and-mortar); (3) its highly extensible platform with a large third-party ecosystem; (4) significant technological advantages over peers; (5) a unique pricing model that scales with its customers’ success; and (6) numerous growth initiatives (Shopify Plus, Capital, shipping, wholesale, international opportunity), which we believe position the company for sustainable strong revenue growth over the next several years, at least.”
Wall Street is not willing to give up on the Canadian e-commerce platform just yet, as TipRanks analytics exhibit SHOP as a Buy. Based on 16 analysts polled by TipRanks in the last 3 months, half rate a Buy on Shopify stock while half maintain a Hold. The 12-month average price target stands at $107.91, marking a 7% upside from where the stock is currently trading.
Saying Goodbye to Most of Tesla
Tesla might be too much of a dreamy concept at this point- one that sounds beautiful, but is not practical in a world of increasing competition for a stock that sent Balyasny to sell off 64,748 shares in his firm’s stake in the company. Retreating in the second quarter has reduced BAM’s position in Tesla by almost three quarters to just 23,102 shares worth $8,354,000.
Standpoint Research analyst Ronnie Moas would like Balyasny’s backpedal on the electric car giant, as he just grew sick and tired of waiting on the expense-mooching Tesla that has yet to turn over profit. In other words, expect CEO Elon Musk’s empire to fall short of $300 “before you see $500,” says Moas.
Presently, the stock trades at just over $350- a valuation the analyst emphasizes is much loftier than most auto manufacturing players in the biz. Considering the list of rivals “shooting at Tesla right now” is neither short nor sweet for Musk, it is easy for Moas to question an empire that may be built on prestigious branding legacy, but is to date “trading at least 3 to 5 years ahead of itself.”
Having lost patience for Tesla to create the kind of earnings momentum it needs for Moas to be able to rationalize such a pricey market investment, the analyst flees the sidelines to the land of the bears, downgrading from a Hold to a Sell rating on the stock without suggesting a price target. (To watch Moas’ track record, click here)
“Anyone who thinks the German car manufacturers are going to sit on the sidelines and watch Tesla eat their lunch is mistaken,” Moas explains, no longer surveying from a stance of caution with a market that treats Tesla like the next Amazon or Apple “when in fact they have a lot more competition than Apple and Amazon have.”
In the grander scheme, Moas has tried to place his faith behind the man who “sent rockets into space,” and acknowledges it is not simple to “bet against Elon Musk.” All the same, the bearish circumstances have never been clearer to the analyst, who asserts: “That being said, the market has priced in whatever good news you can come up with here including a 1,000,000 figure for annual vehicle sales looking out to 2022. Depending on which multiple you want to attach to 2022 earnings, Tesla needs to generate between $10 and $20 in EPS in order to justify the current share price. As I mentioned earlier — they are not even profitable right now.”
Wall Street is not as decisively pessimistic on the electric car giant, as TipRanks analytics reveal TSLA as a Hold. Out of 21 analysts polled by TipRanks in the last 3 months, 6 are bullish on Tesla stock, 7 remain sidelined, and 8 are bearish on the stock. With a loss potential of nearly 13%, the stock’s consensus target price stands at $310.93.