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Even after Lyft beat, Wall Street pummels former unicorns

By Noel Randewich
Traders work on the floor at the NYSE in New York

By Noel Randewich

SAN FRANCISCO (Reuters) - Wall Street pummeled shares of companies including Pinterest <PINS.N>, Lyft <LYFT.O>, Uber Technologies <UBER.N> and SmileDirectClub <SDC.O> on Thursday as investors grew more sour on money-losing former startups that went public this year.

Pinterest slumped 20% in extended trade after its quarterly revenue and forecast slightly missed analysts' expectations. Earlier, Lyft tumbled 6% after reporting better-than-expected quarterly results.

Uber slumped nearly 7%, bringing its decline since its May initial public offer to 30%. SmileDirectClub also fell 4.1%, extending the loss since its initial public offering last month to 49%, despite a recent wave of "buy" ratings from investment banks involved in listing the direct seller of plastic teeth aligners that compete with traditional braces.

Crowdstrike Holdings <CRWD.O> fell 3%, while Beyond Meat <BYND.O> and Slack lost more than 5%. Instead of an IPO, Slack listed its shares directly on the stock market in June, and they have fallen 15% since then.

The day's selling in those stocks reflects investors' growing distaste for a wave of high-profile companies that went public this year, many of them cloaked in the trappings of technology companies worthy of the highest valuations, despite being unprofitable.

"There's an utter lack of appetite for unprofitable tech companies," said Joel Kulina, senior vice president of institutional cash equities at Wedbush Securities. "People just want the year to end, and protect any profits they have, and not try to catch any falling knives."

Underscoring Wall Street's increasing selectiveness, Lyft's stock fell after it said higher-than-expected third-quarter revenues and an improved outlook showed it was well on its way to profitability by the end of 2021.

Uber, Lyft's larger rival, is expected to post a 25% increase in revenue to $3.69 billion and a loss of $1.45 billion when it reports on Monday. For full-year 2019, analysts expect revenue growth of 24%, down from 42% growth in 2018.

Pinterest's quarterly net loss widened to $124.7 million, while - excluding certain items - it earned a cent per share, better than analysts' estimates. With Thursday's steep decline after the bell, Pinterest's stock remains up just 6% from the price in its April IPO. It had been among the more successful of this year's series of IPOs from "unicorns," or rare startups valued at over $1 billion.

Plant burger seller Beyond Meat last Monday reported its first-ever net profit and raised its full-year sales forecast, but its shares have fallen 20% since then. The stock has been hurt in part by the lifting of a restriction on insiders and employees selling their shares, which are still up 238% since Beyond Meat's May IPO. Analysts on average expect Beyond Meat to lose more money over the next two quarters.

Unprofitable U.S. companies holding IPOs this year have had a median stock loss of 2%, compared to a median increase of 4% for profitable companies that held IPOs, according to a Reuters analysis. The S&P 500 <.SPX> has risen 21% in 2019.


(Reporting by Noel Randewich; Editing by Tom Brown and Richard Chang)