March 28, 2023

These 2 tech stocks posted 40%+ gains on Wednesday | A motley fool

Stocks took a beating on Wednesday as initial excitement over the idea that the Federal Reserve might slow rate hikes gave way to the dawning realization that the central bank remains fully committed to fighting inflation, seemingly at any cost. After briefly popping into positive territory in the afternoon, Dow Jones Industrial Average (^DJI -1.55%), S&P 500 (^GSPC -2.50%)and Nasdaq Composite (^IXIC -3.36%) all suffered substantial losses by the time of closing.


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Data source: Yahoo! Finance.

Considering the volatility, it was surprising to see a couple of stocks manage to generate huge gains of 40% or more. Perhaps more surprising was the fact that both entered the hard technology sector. Find out more about why below Benefitfocus (BNFT 48.21%) and Bandwidth (BAND 41.63%) were big winners on an overall difficult day for the stock market.

Benefitfocus gets an offer you can’t refuse

Shares of Benefitfocus managed a huge rally on Wednesday, ending the day up 48 percent. A specialist in cloud-based benefits management software received a takeover bid in which the buyer took advantage of a long-term decline in stock value to obtain a relatively inexpensive benefit.

Voya Financial (BUTTER -2.41%) and Benefitfocus reached an agreement according to which Voya will purchase all outstanding shares of Benefitfocus. The all-cash deal values ​​the company at $570 million, and shareholders will receive $10.50 per share for their holdings.

The deal has benefits for both companies. Voya has tried to focus its strategic vision on the workplace. Taking advantage of new opportunities to provide cutting-edge technology that helps employers manage their employee benefits more effectively is an obvious way to expand their business. For Benefitfocus, on the other hand, Voya’s large customer base, financial and technological resources, and a wider operational support network should accelerate the growth and adoption of its software.

The news is bittersweet for Benefitfocus shareholders, as the stock had exceeded the purchase price of $10.50 a share back in April. This isn’t the first acquisition of a fast-growing cloud company at rock-bottom prices, and it highlights one of the risks long-term investors face when a company doesn’t want to remain independent long enough to recover from difficult circumstances.

Bandwidth climbs to the cloud

Bandwidth’s shares rose 42 percent. The cloud-based business communication company reported its third quarter results, which showed continued growth and good future prospects.

Bandwidth’s third-quarter numbers were better than expected, although the growth figures they gave were not that attractive. Revenue rose 13% to $148 million, and adjusted earnings per share of $0.27 were up 8% year over year and better than expected. Investors believed that Bandwidth would hardly remain profitable even on a quarterly adjusted basis, so the profit growth came as a positive surprise.

There was some pressure on Bandwidth’s business metrics, but that didn’t stop the company from boosting its guidance for the year. The dollar-based net retention rate fell from 125% a year ago to 109% in the last quarter, and the number of active customers grew just 5% over the past 12 months. Still, the company now expects full-year revenue of $562 million to $564 million and adjusted earnings per share of $0.35 to $0.37 by 2022.

Even after the rally, though, Bandwidth’s stock has lost well over 75% of its value since this time last year. It may take a lot more good news for shareholders to regain all their confidence.

Dan Caplinger has no position in any of the listed stocks. The Motley Fool has positions in Bandwidth Inc and recommends it. The Motley Fool has a reporting policy.

#tech #stocks #posted #gains #Wednesday #motley #fool

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