Market commentary by eToro analyst for Romania, Bogdan Maioreanu
2022 was a year when investors had very few choices to hide from the high inflation, rising interest rates and devaluation of shares. In the S&P 500 index the only sector ending the year up was Energy. There is no surprise since the same sector was the one driving the steep inflation both in the US and Europe. Information Technology, a preferred sector for investors, decreased on average close to 29% but there are companies like Tesla that lost more than 65% of their value in 2022. So the question the investors are asking is if the biggest losers of 2022 can redeem themselves in 2023?
For Tesla (TSLA) last year was not very good. Between the chips crisis, the interest rate increases and Elon Musk’s Twitter saga, the company devalued, triggering some investors in the company to question the Board of Directors’ job to protect shareholders value and even questioning Elon Musk’s future as both the Tesla and Twitter CEO. The company share price continued its roller coaster with a sharp drop of 12% at the beginning of the year but now is on a positive trend, up almost 14% year to date. But analysts are still seeing Elon Musk’s focus on Twitter as a potential issue for Tesla’s evolution in 2023.
For Romanian investors, technology is one of their favorite areas of investment. According to the latest eToro Retail Investor Beat survey, almost 70% of investors have shares from this industry in their portfolios or intend to buy in the next few months. Tesla is the most held stock by the Romanian investors on the eToro platform at the end of 2022, followed by the Chinese EV producer Nio and the Romanian unicorn UiPath (PATH).
Romanian-born UiPath is another company that lost close to 70% of its valuation. If at the beginning of last year the company shares were traded at close to 44 dollars, at the end of the year the price was a bit over 12 dollars. The company is the market leader in the field of Robotic Process Automation (RPA) according to consulting company Gartner. In 2023 the company looks well positioned to capitalize on an expanding market that was valued at 10 billion dollars last year with prospects to reach over 43 billion dollars in 2029. But close behind UiPath is Microsoft, a tech giant with deep pockets that is currently looking to invest 10 Billion dollars in Open AI, the company behind the internet sensation ChatGPT, a conversational Artificial Intelligence chatbot. So, UiPath can benefit from the current trend in the US labor market where companies forced to cut costs are starting to fire people and are trying to automate as many processes as possible. However Microsoft remains a threat for the Romanian-born unicorn. UiPath share price soared 19% in the last five days.
Among the top 10 losers from 2022 the first place is held by Generac Holdings (GNRC), a company that specializes in power generators for both home and industrial use. Last year it lost 73% of its value. Some of the reasons were the high level of inventories and lack of workforce able to install the generators. But the drop in value is much more steep than the one of other companies in the industry. Some analysts are seeing this as a buy opportunity, considering the company undervalued. If we take into consideration the growing trend of power outages in the United States and movement to solar energy the company may be ready to capitalize on this. The share price rose 14% from the beginning of this year.
2023 can bring a rebound for some of the losers of last year. The lower inflation outlook and the possibility that the Fed will pivot on its interest rate policy in the second half of the year is taking pressure off valuations that led to last year’s price collapse. Attractive prices of companies that only one year ago were considered very expensive might make buyers give them their confidence and money.
* Bogdan Maioreanu, eToro analyst and markets commentator, has over 20 years of experience in financial services and investments and a strong background in journalism. He held different Corporate Banking management positions in both Raiffeisen Bank and OTP Bank, before moving to business consultancy roles working for IBM Romania among others. Bogdan is an Executive MBA from Asebuss and Washington University.
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