Goldman is All Wrong About this Tech Stock

You're receiving this email as part of your subscription to Lou Basenese’s Trend Trader Daily [Unsubscribe](. [Trend Trader Daily] Goldman is All Wrong About this Tech Stock Thursday, June 2, 2022 It’s only natural in the aftermath of a market sell-off for analysts and investors to sift through the wreckage to identify unfairly punished and undervalued stocks. And right on cue, CNBC reports that Goldman Sachs is out with four “compelling” tech giants to buy to “weather volatility” and possibly pocket “nearly 140%” gains. Can you say, “Click-bait”?! Here’s why you should completely ignore the storied investment bank’s top recommendation… > ADVERTISEMENT < Renowned Economist issues startling prediction | America's Future PhD Economist: "Don't Bet on It" According to former Goldman Sachs executive Nomi Prins... Americans who are hoping for a 'return to normal' are going to be shocked when they see what happens next in America. She says, "If you're betting your job, savings, or retirement accounts on a return to 'normal' you're about to be left behind by a brand-new crisis few see coming." [Click here now to see America's next crisis.]( Ride-Hailing is Hard… And Unprofitable After suffering through seven consecutive weeks of declines for the Nasdaq – the longest losing stretch for the tech index in over two decades – there’s no denying compelling bargains now exist. According to Goldman’s list and price targets, the most compelling of the bunch are: - Amazon.com, Inc. (AMZN): $3,700 price target, implying 52% upside. - Alphabet Inc. (GOOG): $3,000 price target, implying 30% upside. - Meta Platforms, Inc. (FB): $300 price target, implying 55% upside. - Uber Technologies, Inc. (UBER): $55 price target, implying 129% upside. Remember, stock prices ultimately and always follow earnings. With that in mind, I can get behind Goldman’s bullish calls on Amazon and Alphabet. And I can understand the call on Meta since it’s trading at the cheapest levels ever, based on the current and forward price-to-earnings ratio. Even though I’m convinced Meta’s the most vulnerable to a recession and our short trade is working (see [here](). But the bullish call on Uber? Complete insanity! And the reason couldn’t be more simple: the company has struggled to report a single penny in profit, let alone consistently. And even the rosiest analyst projections show the company reporting another loss this year. Yes, But… Analysts do expect the company to turn a (small) profit of $19 million next year. And Goldman believes, per CNBC, “The company has the potential to achieve top-line growth of more than 20% over the next 3-5 years from its platform exposure to transport and local commerce.” So there’s a hope for small profits in the future and the potential for strong sales growth that could conceivably drive even more profits. A little perspective is in order, here, though. Consider: - A $19 million profit is peanuts compared to the $30+ billion in losses Uber’s reported since becoming a public company. And hardly enough to justify a rally for shares of a company with a $47 billion market cap. - Management long contested that Uber would become consistently profitable at scale, thanks to network effects. And as CEO Dara Khosrowshahi put it, “Market size is irrelevant if it doesn’t translate into profit.” Indeed! But if operating in 72 countries, over 10,000 cities, and with over 115 million active monthly users isn’t scale, what is? I’ll let journalist Ali Griswold sum it up, “Uber is the definition of scale, yet it is still nowhere near consistent and reliable profitability.” Amen, sister! Now, I don’t want to sound like I’m picking on Uber exclusively. As I’ve long contested, the problem is with the entire ride-hailing space and “frictionless” economy. The economics just don’t work out. For too many years, this reality has been obscured by investor capital essentially subsidizing massively money-losing businesses. Particularly in the ride-hailing industry. Case in point: Uber’s closest U.S. competitor, Lyft, Inc. (LYFT), can’t turn a profit either. In fact, in the last 17 quarters, Lyft’s torched nearly $7 billion in capital. Add-in other major players (like China’s Didi, Singapore’s Grab, and India’s Ola) and collective losses in the industry are now approaching close to $100 billion since inception. Bottom line: Ride-hailing is a dumpster fire for investor capital and it’s not going to change anytime soon, if ever. So don’t be fooled by flashy headlines to add your hard-earned capital to the blaze. If anything, consider getting and staying short.   FOR TREND TRADER PRO READERS ONLY > [LEARN MORE]( < Ahead of the tape, Lou Basenese Founder & Chief Investment Strategist   Copyright © Trend Trader Daily, All rights reserved. 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