Jackson: it’s time to ‘selectively’ invest in ‘profitless tech stocks’


Jackson: it’s time to ‘selectively’ invest in ‘profitless tech stocks’

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Wajeeh Khan

Jun 15, 2022

Eric Jackson explains why it’s time to shop for profitless tech stocks.

One of the names he likes is Twilio Inc down nearly 70% year-to-date.

Jackson says there isn’t a lot of downside left in many of these names.

The U.S. Federal Reserve could raise interest rates by as much as 75 basis points on Wednesday. Still, the President of EMJ Capital says now is the time to go shopping for the “profitless” tech stocks.

Rationale for investing in profitless tech stocks

Eric Jackson quoted the example of Amazon.com Inc to explain why some of the brutally beaten down tech stocks could spell opportunity for the long-term investors. On CNBC’s “Closing Bell: Overtime”, he said:

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Remember 20 years ago, there was a cover on Barron’s that said Amazon.Bomb. That was the peak pessimism for Amazon, which was seen as a low-quality profitless growth tech company at the time. But it grew up to be a behemoth.

Jackson recommends that investors handpick names that aren’t free cash flow positive yet, but could generate a lot of it in the coming years. One such name, he added, is Twilio Inc (NYSE: TWLO).

Profitless tech stocks may have hit the bottom

The President of EMJ Capital is convinced many of the profitless tech stocks have come down so significantly that there isn’t much of a downside left in them, regardless of what the Fed or the economy at large does.

At some point, fundamental dynamics of a company; its revenue growth, is it producing FCF can win if they’re priced attractively. I think a lot of these growth stocks have been re-rated so significantly that it’s time to be looking selectively at these names.

The tech-heavy Nasdaq Composite has tanked another 12% after a worse-than-expected CPI print for May on Friday.

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