The recent bankruptcy of Silicon Valley Bank and the impact of the Federal Reserve's year-long interest rate hikes damped the prospects of the tech industry, which are further compounded by job cuts and reduced spending on advertising.
In this article, I will discuss three tech stocks, Ouster, Inc. (OUST), Alpine 4 Holdings, Inc. (ALPP), and Integrated Media Technology Limited (IMTE), which have declined significantly in price over the past year and seem primed for bouts of volatility.
The bankruptcy of Silicon Valley Bank (SVB) is likely to have significant ripple effects on the tech industry, particularly in the area of financing for startups. As a leading commercial bank for tech startups in the US, SVB's failure will deprive many startups of a valuable source of funding, which may impede growth and innovation.
Moreover, since March 2022, the Federal Reserve has implemented a tightening policy to manage inflation, resulting in a rapid increase in interest rates throughout the economy.
These interest rate hikes have particularly affected the tech industry, as the tech companies’ value are more dependent on future growth projects that take years to pay off. Also, higher interest rates reduce estimates for future earnings, further impacting high-growth tech companies.
Additionally, the tech sector has been hit by waves of job cuts due to slowing sales growth and economic headwinds. Furthermore, digital advertisers are reducing their spending due to inflation, leading to challenges for tech companies that rely heavily on advertising revenue.
Furthermore, according to Citi Group's chief economist Nathan Sheets, the US may be facing a credit crunch and a potential recession in the near future. He cites the Federal Reserve's tightening of monetary policy and ongoing issues in the banking industry as contributing factors to this possible outcome.
As a result, the tech industry could face further headwinds leading to restrained consumer spending and a decline in demand.
So, OUST, ALPP and IMTE might be best avoided now.
Ouster, Inc. (OUST)
OUST designs and manufactures high-resolution digital lidar sensors and enabling software that offers 3D vision to machinery, vehicles, robots, and fixed infrastructure assets. Its product range includes OS, a scanning sensor, and DF, a true solid-state flash sensor.
OUST’s trailing-12-month asset turnover ratio of 0.15x is 76.2% lower than the 0.61x industry average. Its trailing-12-month gross profit margin of 26.64% is 47.4% lower than the 50.63% industry average.
OUST’s product revenue declined 7.7% year-over-year to $10.94 million in the fiscal fourth quarter that ended December 2022. Its gross profit fell 48.5% year-over-year to $1.84 million, while loss from operation rose 21.1% from the prior-year quarter to $42 million.
Additionally, net loss rose 48.8% year-over-year to $42.18 million and net loss per share grew 35.5% from the prior-year quarter to $0.23.
OUST’s EPS is expected to come in at negative $2.07 for the fiscal first quarter ended March 2023, indicating a 9.2% year-over-year decline. Also, the stock failed to surpass the revenue estimates in each of the trailing four quarters, which is disappointing.
The stock has plunged 91% over the past year and 58.5% over the past month to close the last trading session at $3.24. Its 24-month beta is 2.21.
OUST’s POWR Ratings reflect this bleak outlook. The stock has an overall F rating, equating to a Strong Sell in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
OUST also has an F grade for Sentiment, Quality, and Stability and a D for Growth. It is ranked #38 in the Technology - Electronics industry.
Click here to access the POWR Ratings of OUST (Value and Momentum).
Alpine 4 Holdings, Inc. (ALPP)
ALPP is a technology holding company that provides electronic contract manufacturing solutions in the United States.
ALPP’s trailing-12-month gross profit margin of 18.48% is 63.5% lower than the 50.63% industry average. Its trailing-12-month negative EBITDA margin and net income margin of 19.37% and 15.61% are lower than the industry average of 8.85% and 2.61%, respectively.
On April 18, 2023, ALPP received a notice from Listings Qualifications Department of The Nasdaq Stock Market LLC indicating that the company is not in compliance with the Nasdaq Listing Rule 5250(c)(1) due to its failure to file its 2022 Annual Report on Form 10-K with the SEC in a timely manner.
The April Notice stated that Nasdaq had previously granted an exception until May 22, 2023, for the company to file its delinquent Form 10-Q for the period ended September 30, 2022.
During the fiscal third quarter that ended September 30, 2022, ALPP’s total operating expenses increased 132.7% year-over-year to $3.89 million. The company’s net loss increased 162.1% year-over-year to $4.76 million, while its net loss per share rose 100% from the prior-year quarter to $0.02.
The stock has lost 67.1% over the past year to close the last trading session at $0.30. It has declined 36.8% over the past month. Its 24-month beta is 1.37.
ALPP’s weak fundamentals are reflected in its POWR Ratings. The stock has an overall F rating, which equates to a Strong Sell in our proprietary rating system.
It also has an F grade in Quality and Value and a D in Sentiment. ALPP is ranked #39 in the same industry.
For additional POWR Ratings of ALPP (Growth, Stability, and Momentum), click here.
Integrated Media Technology Limited (IMTE)
Based in Wanchai, Hong Kong, IMTE offers laminated switchable glass, nano-coated plate filter, air filter, and Internet of Things (IoT) products.
IMTE’s trailing-12-month asset turnover ratio of 0.01x is 99.1% lower than the 0.61x industry average. Its trailing-12-month negative net income margin of 230.99% is significantly lower than the 2.61% industry average.
In November 2022, IMTE announced that it had received a notification letter from the Nasdaq stating that the company did not meet the minimum bid price requirement of $1.00 per share for 30 consecutive business days, as set forth in Nasdaq Listing Rule 5550(a)(2).
During the half year that ended June 30, 2021, IMTE’s net revenue declined 99.3% year-over-year to AUD3.29 thousand ($2.19 thousand). Its total expenses rose 42.5% year-over-year to AUD7.17 million ($4.77 million). Moreover, its loss for the period grew 47.5% year-over-year to AUD7.13 million ($4.74 million).
The stock has declined 91.2% over the past year and 26.5% over the past month to close its last trading session at $0.36. Its 24-month beta is 1.15.
It is no surprise that IMTE has an overall F rating, equating to a Strong Sell in our proprietary rating system.
IMTE is also graded an F in Value, Quality, and Stability and a D for Momentum. It is ranked #37 in the same industry.
In addition to the POWR Ratings stated above, IMTE’s rating for Growth and Sentiment can be seen here.
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OUST shares rose $0.05 (+1.54%) in premarket trading Wednesday. Year-to-date, OUST has declined -62.46%, versus a 6.59% rise in the benchmark S&P 500 index during the same period.
About the Author: Kritika Sarmah
Her interest in risky instruments and passion for writing made Kritika an analyst and financial journalist. She earned her bachelor's degree in commerce and is currently pursuing the CFA program. With her fundamental approach, she aims to help investors identify untapped investment opportunities.
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