China internet stocks were getting hit in premarket trading Monday after the country changed its reserve requirements for lenders
Meanwhile, a Bloomberg report from last week about Chinese hacking of motherboards continues to reverberate: Over the weekend, the Department of Homeland Security said it believed companies such as Apple and Amazon that have denied the report.
Here’s what tech investors need to know on Monday.
The Department of Homeland Security this weekend said that it had “no reason to doubt” statements made by companies in a Bloomberg piece discussing how Chinese operatives were able to hack motherboards made by Super Micro Computer. Bloomberg reported last week that Apple andAmazon.com both found malicious microchips on Super Micro motherboards, but the two tech giants denied the report.
Weakness in China
Chinese tech stocks were falling after the People’s Bank of China said it would cut the amount of money that commercial banks had to hold as reserves. The move is intended to boost growth as tariff concerns resulting from U.S-China trade tensions continue to weigh on the Chinese economy.
Shares of iQiyi , known as the Netflix of China, were down 0.9% premarket, even though Jefferies analyst Karen Chan began coverage of the stock with a Buy rating on Sunday night. She sees room for the company, which was spun out of Baidu earlier this year, to benefit as it gains share from traditional, or linear, television and better monetizes its content offerings.
Cheers for Instagram after AdWeek conference
Jefferies analyst Brent Thill wrote positively of advertisers’ receptiveness to Instagram following last week’s AdWeek conference. The Facebook -owned platform was the biggest winner from the event, Thill wrote in a Sunday note to clients, based on general buzz around its offerings as well as attendance at a session featuring Instagram and Nike .
Thill said advertisers seemed upbeat about the potential for Instagram’s Stories feature to help their brands. Better monetizing Stories is a crucial part of Facebook’s strategy, as audiences sour on the core Facebook property and make their way over to Instagram, seen as the hipper platform. Facebook said on its latest earnings call that Instagram users like viewing Stories, which are photos or videos that disappear after 24 hours, but that these pieces of content “currently have lower levels of monetization” than the traditional news feed.
In need of a fix
Stitch Fix shares were up 2.5% premarket after KeyBanc Capital Markets analyst Ed Yruma defended the stock, which plunged 40% last week in the wake of a disappointing earnings report. “Our view is that investment cycles are not unusual for growth companies and can provide attractive entry points,” Yruma wrote following meetings with Stitch Fix management.
The company’s active-client metric disappointed investors, but Yruma saw a couple of potential reasons for that weakness. He noted that Stitch Fix limited national television ads as part of a test last quarter, while shifting a bit to local ads. He is upbeat that the company can accelerate the addition of new customers in its men’s and kids’ businesses.
Square’s biggest bear on Monday morning commented on the expansion of the company’s lending business, which he said “adds to Square’s overlooked credit risk.” BTIG analyst Mark Palmer has a negative view of the company’s plan to start extending loans to customers who make big-ticket purchases at some merchants that use Square.
Palmer has long expressed caution about Square’s merchant-lending business, arguing that it made the company more vulnerable to credit risk. The consumer-loan aspect, he said, “is likely to increase this vulnerability.” He maintained his Sell rating and $30 price target. Square shares closed at $94.11 Friday and are down 0.6% premarket.