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Tech Stocks Are Under the Hammer. Here's What You Need to Know


image Courtesy of Square

The tech sector could be in for another rough day Thursday, following yesterday's selloff. Shares of many big tech names were down premarket after Wednesday's selloff in the U.S. market spread to Europe and Asia.

Square was among the biggest tech losers premarket, after the company announced that its chief financial officer would be leaving for a CEO post at startup Nextdoor. The stock was down 9.6%. Chinese tech stocks are also taking an early tumble. The American depository receipts of carmaker Nio, e-commerce platform Qutoutiao, and video-sharing company Bilibili were all off more than 5%.

Futures on the Nasdaq 100 futures were down 0.5%, recovering from steeper losses earlier.

Here's what tech investors need to know for Thursday.

Analysts seem to agree that the departure of Sarah Friar, Square's chief financial officer, is a negative for the payments company-at least in the near term. Friar was the public face of Square, especially to investors.

"We argue her leadership in many ways has been more instrumental to Square's emergence as a true payments disrupter and impressive growth story than CEO Jack Dorsey's," wrote SunTrust Robinson Humphrey analyst Andrew Jeffrey, who rates the stock at Hold with a $66 target.

Mizuho analyst Thomas McCrohan lowered his price target on the stock to $90 from $95 "to reflect increased uncertainty" amid the leadership shift, but he argued that the company has a "human-capital advantage" that goes beyond Friar. He rates the stock a Buy.

Apple

Apple has increasingly been looking for ways to gain more control over its supply chain, and the company appeared to make a move in that direction on Thursday. Dialog Semiconductor, a longtime Apple supplier, said in a release that it would license technologies and transfer assets to the smartphone giant. Dialog will also send over more than 300 employees.

As part of the deal, Apple will pay $300 million in cash and prepay $300 million for Dialog products, which will be delivered over the next three years. Apple didn't immediately return a Barron's request for comment. Its shares were down 1.4% premarket.

The FAANG stocks are getting crunched again premarket, with Netflix the biggest early loser. The company was due to report quarterly earnings on Tuesday, in what is generally viewed as the kickoff for big-tech earnings.

Piper Jaffray analyst Michael Olson wrote Thursday that Netflix has the potential to positively surprise investors with its international subscriber count, though he thinks the company will probably report domestic numbers in line with expectations. The upbeat comments aren't likely to move the needle, however, amid the broad market action.

Netflix shares were down 2.6% premarket, while Amazon.com shares were off 2.4%. Facebook's stock was faring best, down 1.6%.

Roku took one of tech's biggest tumbles on Wednesday, dropping 12.5%. On Thursday, a steadfast bull defended the stock in a note to clients.

"We believe that Roku is a less risky investment today than it was 12 months ago even though its valuation is much higher," wrote Needham's Laura Martin. "In the fishbowl of being a public company, Roku's management team has made many value-creating decisions and innovations."

Martin remains upbeat about new revenue streams such as its own ad-supported channel and a measurement program that seeks to make use of the company's data troves. She rates the stock a Buy with an $85 price target, which is about 50% above Wednesday's close of $56.45.

Chip stocks were getting crushed again Thursday amid the broader tech rout. Advanced Micro Devices was one of the biggest early losers, after its shares entered a bear market on Wednesday. The stock was down 4.8% premarket.

Micron shares were falling as well, a day after the company held an "insight" day in San Francisco. "We walked away incrementally optimistic on the growing importance of DRAM in artificial intelligence workloads," wrote Cowen analyst Karl Ackerman, who attended the event.

That said, big-picture talk probably won't help the chipmaker on a day like Thursday. The stock was off 2.2% premarket.

Email: editors@barrons.com

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.



This article appears in: Technology , Stocks



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