Several key Russian tech companies are listed on Western stock exchanges. Among them are software development and service company Luxoft (NASDAQ: LXFT); Mail.ru Group (LSE: MAIL), the owner of Russia’s leading social network Vkontakte and of a range of other Internet properties; mobile operator MegaFon (LSE: MFON); payment operator QIWI (NASDAQ: QIWI); and Yandex (NASDAQ: YNDX), the search company that dominates the Russian-language Internet segment.
The deterioration of the Russian economy and of the international climate throughout 2014 has had a largely negative impact on these companies. Although some firms have rebounded throughout the year, the sudden decline of the ruble in December has cheapened their revenues in US dollar terms, sending stock prices tumbling.
Yandex sees share value halve in 2014
With its share of more than 60% of the local search market, Yandex has been relatively resilient to the worsening domestic macroeconomic conditions in the country for much of the year. Although its stock shrank in price from more than $43 per share on December 31, 2013, to a low of $24 in late April, the company began to see some improvement. By May 20, its stock was trading at $30.82 per share and in late October its shares rallied by 5.6% based on positive growth forecasts for the online advertising industry, which represents around 90% of Yandex revenues.
However, the huge drop in ruble value on December 16, dubbed as Black Tuesday, wiped off 9.8% from Yandex stocks, bringing the total decline for 2014 to over 53%. Analysts suggest that Yandex stock priced this low is an attractive option as ad budgets will likely be the last thing companies cut back on during the crisis.
The search giant, which went public on the NASDAQ in 2011, was also introduced on the Moscow exchange earlier this year.
Mail.ru Group suffers major setback
Mail.ru Group has suffered a volatile year on the markets. The holding, owned partly by Russian billionaire Alisher Usmanov, had a similar market trajectory as Yandex, suffering a gradual decline throughout the first half of 2014 before rebounding in the third quarter and October. The company reported a year-on-year increase of 13% in third-quarter sales, which helped stabilize stock value.
Nonetheless, the impact of the dreaded Black Tuesday proved more severe for the firm, with shares tumbling by almost 15% to $14.78. In all, Mail.ru Group stock declined by 63% in 2014 despite strong growth revenue projections for 2015.
MegaFon down 45%
Usmanov also saw a sizable asset shrink with MegaFon, a leading Russian telecom operator which was introduced simultaneously on the London and Moscow exchanges in 2012. Shares in LSE-listed MegaFon, of which he owns half, are down 45% this year, dragged lower by a weak market despite leading in 4G offerings domestically.
QIWI’s perceived risks
Russian payment operator QIWI, which raised $212 million in its NASDAQ IPO in the spring of 2013, has also seen a significant price decline throughout the year, with negative earnings estimate revisions for the fourth quarter and the year as a whole. As its share price has nosedived by around a third since November, reaching a 52-week low of $21.00 in mid-December, analysts are suggesting the company’s stock offers an especially risky proposition at the moment.
Luxoft offers a bright light amid the clouds
However, not all Russian tech majors have seen a disastrous year. Luxoft, a part of Russia’s IBS Group, is ending a tough year on a high. Benefitting from a strong global client portfolio, which means it is less impacted by a weak Russian economy, Luxoft stocks rose by a third in the fourth quarter.
Under pressure from its Western clients, the company moved a sizable proportion of its staff from Ukraine and Russia to other parts of Europe, thereby gaining more stability in the markets.
