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 Concentrix Corporation (NASDAQ:CNXC) 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.
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).
Concentrix Corporation (NASDAQ:CNXC)
Year to Date Gain: -52.02%
Number of Hedge Fund Holders: 25
Concentrix Corporation (NASDAQ:CNXC) provides technology-infused customer experience (CX) solutions globally. Their services include CX process optimization, technology innovation, automation, analytics, and business transformation. They operate across various communication channels like voice, chat, email, social media, and custom applications.
Concentrix Corporation (NASDAQ:CNXC) is one of the worst-performing tech stocks in 2024, having lost 52% in market value year to date. While providing technology-infused customer experience solutions, it has been under pressure on providing weaker-than-expected guidance for the fourth quarter and full year.
The technology and services company expects fourth-quarter earnings per share to range between $2.90 and $3.16, below analysts’ estimates of $3.48 a share. Likewise, it expects full-year earnings to range between $11.05 and $11.31, below analysts’ expectations of $11.71 a share. The decline underscores the challenges that Concentrix is facing, mainly due to clients’ commitments and offshoring strategies.
Concentrix Corporation (NASDAQ:CNXC) faces a challenging market environment characterized by stiff competition in providing customer experience solutions. Nevertheless, its revenue in the third quarter has shown signs of resilience, having increased 2.6% to $2.4 billion. The increase was driven by growth in the retail travel and e-commerce sectors.
Similarly, it is positioning itself to access higher-margin projects and provide better value to its clients and shareholders due to its focus on technology, AI integration, and transformative business opportunities. Future growth should be fueled by its strategic direction and the possibility of automation and consolidation.
As of Q2 2024 end, 25 out of the 912 hedge funds profiled by Insider Monkey had bought and owned Concentrix Corporation (NASDAQ:CNXC)’s shares. Lauren Taylor Wolfe’s Impactive Capital was the biggest shareholder due to its $243.40 million stake.
Here is what Investment management company First Pacific Advisors said about Concentrix Corporation (NASDAQ:CNXC) in its first quarter 2024 investor letter:
“Concentrix Corporation (NASDAQ:CNXC) is one of two top customer experience (CX) vendors globally. The company started managing call centers but has since evolved into a high-tech business process outsourcer (BPO) that also designs and manages customer-facing websites and apps, integrates the data, and optimizes a client’s customer interactions. The company was spun out from TD Synnex, another of the Fund’s core holdings, and we have always been impressed with the company’s innovation and growth. CX is a relatively new business model, and Concentrix has been rolling up smaller competitors. In March, 2023 they bought WebHelp, a leading European CX player, for $4.8B in cash and stock. We believe the WebHelp acquisition will help consolidate an industry where Concentrix and Teleperformance are the largest players. On Jan. 24, 2024 Concentrix reported Fiscal 2023 earnings that included weak 1% – 3% organic growth guidance for 2024. The market’s current concern about the potential of artificial intelligence to disrupt Concentrix’ core call center business has resulted in the underperformance in the shares across the industry. Concentrix has three turns of debt from the Webhelp deal which will be a problem if earnings deteriorate quickly. But Concentrix now trades at less than five times adjusted EPS. We think, but don’t know, that Concentrix’ domain knowledge and integration into customers’ workflows make for meaningful switching costs. We have held on to our Concentrix shares but have not added to the position.”
Overall CNXC ranks 6th on our list of 8 Worst Performing Tech Stocks in 2024. While we acknowledge the potential of CNXC 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 CNXC, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.