We recently compiled a list of the 8 Worst Performing Tech Stocks in 2024. In this article, we are going to take a look at where DoubleVerify (NYSE:DV) stands against the other Worst Performing Tech Stock in 2024.
The Tech Sector’s Resilience Amid Economic Challenges
One of the most popular sectors of the stock market is technology. The sector boasts an impressive track record of explosive returns and the possibility of even greater returns. Likewise, the industry has lived up to expectations in 2024, going by the Nasdaq 100, rallying 21% year to date.
The impressive rally in the tech sector comes against the backdrop of investors shunning high interest rates and inflation to bet on stocks well poised to benefit from the next industrial revolution. With artificial intelligence in the early stages of development, tech stocks with exposure to the burgeoning sector have exploded, with some becoming trillion-dollar empires.
READ ALSO: 10 Most Promising Future Stocks According to Analysts and 10 Most Promising Growth Stocks According to Hedge Funds.
In a note to investors, analysts at Mizuho have already noted that generative AI “is igniting growth and disruption across multiple markets, pushing the frontiers of innovation and productivity.” That’s because AI servers are supporting the development of infrastructure that powers the AI revolution.
The rally in the technology sector has persisted even with economists and analysts questioning the global economy’s health. China’s economy is slowing down to the extent that the government, injecting some stimulus and reforms, has done little to rattle investor’s sentiments on tech stocks.
According to Ray Dalio, the founder of Bridgewater Associates, China must carry out a “beautiful deleveraging” in addition to its recent stimulus measures and reforms to avoid serious debt issues.
“I think the changes that are taking place are terrific changes, but you still have to do the debt restructuring. You need to do it correctly, and that’s as part of a restructuring. That becomes the challenging part of it. I think that will be the test,” Dalio said.
The Impact of High Interest Rates and Inflation on Tech Stocks
Likewise, the US economy has shown signs of lethargy, depicted by a slowdown in the labor and manufacturing sectors. The US Federal Reserve conducted a 50 basis point rate cut to engineer a soft landing and avert recessions, underlining that all may not be well in the world’s largest economy.
Similarly, the International Monetary Fund Managing Director Kristalina Georgieva has warned that high debt and low growth pose significant risks to the global economy, which could hit the equity markets.
While notable progress has been made in supporting the global economic recovery, the IMF chief believes there are challenges in servicing debt that could pose a significant danger to the worldwide economy.
“It’s not yet time to celebrate,” she told Karen Tso. “When we look into the challenges ahead of us, the biggest one is low growth, high debt. This is where we can and must do better,” she added.
Nevertheless, investors have continued to shrug off all these concerns, buoyed by impressive and record-breaking earnings and revenue growth in some of the biggest tech companies. Soaring geopolitical tensions in the Middle East and the uncertainty triggered by the upcoming US election have done little to sway investors’ sentiments about tech stocks.
Nevertheless, mega-cap technology stocks have started to deflate after a dazzling run. Fresh concerns about the state of the economy accompanied the most recent downturn. The valuations of formerly high-flying stocks and the market as a whole continue to be the larger challenge, though, as most economists believe there is little chance of a recession and that rate cuts from the Federal Reserve are imminent.
This is a rotation under the hood, which means that investors are moving from recent winners to names that have been underperforming. In this instance, growth stocks have generally given way to value stocks.
Likewise, amid the resilience of the broader tech sector, not all companies have delivered record-breaking results and generated significant returns for investors. As a matter of fact, some stocks have underperformed in the broader industry, shedding more than 50% in market value.
Source: Pexels
Our Methodology
To compile our list of the worst-performing technology stocks in 2024, we ranked all technology firms based on their year-to-date performance and selected the top 15 with the largest year-to-date losses. Finally, we ranked the stocks in descending order based on their year-to-date losses.
At Insider Monkey, we are obsessed with the stocks that hedge funds pile into. The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
DoubleVerify (NYSE:DV)
Year to Date Gain: -50.20%
Number of Hedge Fund Holders: 20
DoubleVerify Holdings, Inc. (NYSE:DV) is a technology company that offers a software platform for digital media measurement and data analytics. Advertisers mostly use its solutions to increase the effectiveness and quality of advertising investments.
The stock has shed more than 50.20% in market value as investors question its growth metrics in the aftermath of the company providing a weaker-than-expected sales forecast for the year. Last year, management projected that revenue would grow by 22% but cut its forecast to 17% in the first quarter, all but sending jitters in the investment community.
DoubleVerify Holdings, Inc. (NYSE:DV) was forced to cut its full-year revenue guidance in response to customers pulling back on spending on its platform, consequently affecting its revenue stream. The high inflation and interest rates have taken a significant toll on the company’s customer base. Over the years, the company has been delivering revenue growth of upwards of 20%. However, not anymore amid a reduction in advertising spend.
For its second quarter, the advertising company posted mixed financial results. While revenues were up 17% year over year, net income fell to $7.5 million, down from $12.8 million in the same period last year.
According to Insider Monkey’s database, 24 hedge fund portfolios held DoubleVerify Holdings, Inc. (NYSE:DV) at the end of the first quarter, down from 27 in the previous quarter.
The London Company Small Cap Strategy stated the following regarding DoubleVerify Holdings, Inc. (NYSE:DV) in its Q2 2024 investor letter:
“Initiated: DoubleVerify Holdings, Inc. (NYSE:DV) – DV develops software platforms for digital media measurement, data, and analytics. DV sells a critical insurance-like product known as “ad verification,” designed to create transparency, eliminate fraud, and drive ad-spending optimization. Ad verification has reached a point of mass acceptance among digital ad buyers due to its measurable low cost/high reward value proposition. DV operates in a duopoly where it commands the leading market position (>50% market share), by focusing on product innovation rather than sales expansion. DV’s business should continue to benefit from secular tailwinds in digital advertising. Incremental revenue growth should be accretive to returns on capital, given the its high cash margins and minimal capex needs. We initiated our position following a pullback, allowing us to purchase an advantaged company growing at a double- digit rate, with high margins, at a market multiple.”
Overall DV ranks 8th on our list of 8 Worst Performing Tech Stocks in 2024. While we acknowledge the potential of DV as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than DV, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.