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Tech will be able to reposition for outperformance: ERShares COO

Eva Ados, ERShares COO, joins Yahoo Finance to discuss the outlook on the tech sector for the second half of the year and the crypto market.

Video Transcript

- But I want to turn now to Eva Ados, chief operation officer of ERShares, for today's market conversation. Eva, always great to have you here with us. I do want to start with some of those tech earnings. As we've just been talking about Twitter, Snapchat doing incredibly well. What are you expecting next week? Do you see that trend really continuing for Facebook, for Amazon, for Microsoft?

And just more broadly, looking at tech, how well do you think that sector, especially with those big tech names, is going to perform for the second half of the year? They did not lead the first half, as we had seen in 2020.

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EVA ADOS: We think it's going to continue next week. As you said, we see Snapchat and Twitter up 25% and 4%. These are crazy numbers. We think that this story will continue. It's a very interesting thing, what's happening now in the markets.

We-- you know, the hyper growth high flyers, the technology stocks with high PE ratios or high market cap to revenue, the ones that investors thought that they are priced to perfection or at a bubble, they're beating estimates. They have blowout earnings. And they're coming from a very high base because last year we all engaged social media more and technology more because of the pandemic.

And still, they are able to impress us. They are able to outperform. Twitter had a 75% revenue increase. Snap had a 120% revenue increase with a 23% user growth. They added 50 million users in the last year. These are extraordinary numbers. We think this is going to continue.

We believe the previous quarter allowed the cyclicals to tell the story because they were coming from a very low base, so it was really easy to show surprises there. But this time, this quarter we think it's going to be a tech story. Tech will be able to reposition themselves for outperformance.

- Eva, talk to me about pricing that we're seeing right now in the markets, but especially around tech because the tech prices that we've been seeing are incredibly pricey. In fact, just looking around the market, we are seeing pretty pricey prices going on around there. But your notes say that they are actually priced to perfection. What's behind that?

EVA ADOS: So there are some pockets that might be priced to perfection. But as we are seeing, there are other pockets in technology that are still beating estimates, and they still impress us. So what we expect to see in the next quarter is what we already saw so far in the last few weeks, volume growth alternating for lead market performance.

That means the quarter might end flat, but it's going to be a stock picker's market. So people should know their stocks, should do their research. And there will be great opportunities. We will have some outstanding results and great opportunities. So-- and even if the quarter might end flat, it's going to reposition and set the stage for a very strong year end, especially when it comes to the tech category, which what happens normally in a bull market like this, the cyclicals have more money to fuel into technology and cybersecurity infrastructure and other technology solutions towards the end of the year, which will benefit the tech category even more.

- I want to ask you about some of the tech stocks, not here at home but essentially overseas in China. I was talking about Didi at the start of the hour. I'm looking at Alibaba right now, also in the red, down over 4% right now. We've been really seeing Chinese regulators hammering some of these companies, and Alibaba and Didi are not alone.

We have been seeing a lot of these tech companies in China really sliding lately. Are these opportunities, do you think, for some folks right now to buy the dips? Or should they essentially right now stay away from some of these companies as they are facing so many of these regulatory headwinds?

EVA ADOS: We think this particular area, there are 225 Chinese ADRs. They're under pressure. And we see this continuing. Unfortunately, when you have overnight news affecting upcoming IPOs such as Didi or the Ant IPO, those-- this is high risk. And when there's high risk, the discount rate is higher, which means the valuations come down.

So we expect this to continue. But once investors get a better handle of the sovereign risk associated with China as a nation, and once the valuations justify the prices and their risk, then we might see some flows back in. But as of now, we see a lot of money flowing out. There are $2 trillion still in the Chinese ADRs. But we're seeing money flowing out of Chinese ADRs, flowing out of the crypto market, and moving into other speculative areas, such as hypergrowth tech, SPACs, small caps, and emerging markets.

- Speaking about cryptocurrency, you know, we saw that more than one in 10 Americans actually invested in cryptocurrency this year. Bitcoin right now has rebounded from some of the lows that we saw just a couple of days ago, when it was below $30,000.

What are you imagining the cryptocurrency story being throughout the remainder of the year? Should investors essentially go out right now and try to snap up some of that Bitcoin? We are well off some of the highs that we had seen at the level of about $70,000 for one Bitcoin. How are you perceiving the Bitcoin story right now?

EVA ADOS: Well, there is-- as you mentioned, there's a huge number of crypto investors. And they tend to be millennials. In some cases, or in most cases, first-time investors. It's the Robinhood crowd. In fact, 15% to 20% of the assets in Robinhood are in cryptos.

However, we are concerned with we have already been seeing an exodus out of the crypto market into other areas, such as hypergrowth tech, for example Snapchat. And we think that might continue for different reasons, such as ESG concerns, regulatory issues. We saw Binance getting shut down in the UK and Italy, et cetera. And that might continue.

But we think that it was-- the good news is that these investors, the first-time investors, might have come in because of crypto into the market, and now they're getting more strategical in terms of their investments. They're moving on-- moving into other areas. So they might never come back because they lost a lot of money in crypto. Bitcoin is down 40% for the quarter, Dogecoin down 85%.

So-- and some of them came at a much higher price than where we are at now. So some of them had-- have-- have been disappointed. They might never come back, but they are becoming much more strategic, and they're moving into other areas in a better way, which can provide a better risk return for them.

- All right, Eva Ados from ERShares, thanks so much for stopping by as, always.