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Lately, the prices of many tech stocks have fallen dramatically, but while some tech companies have admitted that there are problems in their businesses, some are, as Laura Forman reports in The Wall Street Journal, “still dreaming of boundless growth.” She writes:
The biggest stories in tech recently have been of reckonings. Netflix said last month that it would introduce ads—something Co-Chief Executive Officer Reed Hastings has long eschewed and even referred to as a form of exploitation. The once aspirational Peloton Interactive ousted its founder, lowered the price of its hardware and even bundled that hardware into a new subscription tier in hopes of a more accessible future. This week the Snapchat parent, Snap, has warned that online advertising growth is slowing even more than the market anticipated, sending social-media stocks diving.
And, after going especially big on the promise of automated home-flipping, or “iBuying,” the online real-estate company Zillow Group gave up on the business, with Chief Executive Officer Rich Barton calling it “too risky, too volatile” to its earnings, with “too little opportunity for return on equity.”
So much for a premium on innovation. Shares of these four companies are down an average of around 73% over the past 12 months. So the market isn’t yet rewarding their turn to realism. But companies still dreaming of boundless growth could also be setting themselves up for even greater failure.
In an email to employees earlier this month, Uber Technologies ’ chief executive, Dara Khosrowshahi, acknowledged the market’s current shift away from growth, but he also talked about wanting to grow even faster in areas including food delivery. On the company’s freight business, he complained that less than 10% of investors recently asked about it. “Freight needs to get even bigger so that investors recognize its value and love it as much as I do,” Khosrowshahi wrote.
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