Eq: Tech

(San Francisco)

Have you been upset about missing out on some of the big tech companies in the last decade? Well, your chance to buy in is coming; or at least that is what Wall Street’s bankers want you to think. A string of big tech IPOs appear to be in the works. From Lyft, to Uber, and featuring Pinterest, Airbnb, Slack, and WeWork, a big Silicon Valley roadshow is coming to the market this year and next. The major question is how the companies will fair once public. The tech market has been hurt recently, and public market valuations have been wounded.


FINSUM: These companies have massive private market valuations, and it seems like they will underperform a bit when they do finally debut (at least in the short-term). That said, a couple of them will likely turn into incredible long-term holds.

(Seattle)

Tony Mitchell is a well-known fund manager in the tech space. His tech mutual fund has outperformed the market for years. However, it has done so with a very interesting quirk—it has never held Amazon, until now that is. The reason why is that its P/E ratio always seemed to high at between 190 and 400. However, recently, Amazon’s P/E ratio has fallen back to earth. Its current ~80x is not cheap by any measure, except against its own history. The company’s web services division is growing strongly, its advertising business is surging, and it has a good foothold in the gaming industry. This means it could be a good time to pick up Amazon’s stock.


FINSUM: If you believe Amazon is going to continue its growth story, then right now does seem like an ideal time to pick up shares.

(New York)

Looking for the best big tech stock to buy? Look no further than Google. Alphabet, the parent company of Google, is a better deal than it seems on paper right now. Yes, it is trading for 24x forward earnings, a 50% premium to the S&P, but it has some very strong redeeming qualities. Get this—revenue growth at Google has raged from 21% to 25% per quarter for the last 14 quarters. Further, the important thing about that valuation metric above is that it does not include Google’s massive $105 bn in cash. If you strip that out, along with the loss from its “moonshots” division, and Alphabet is trading at 19x earnings—not bad for a company with that kind of growth! The stock has been beat up lately because of significantly higher spending, which has hurt margins.


FINSUM: Okay, so margins are down a bit, but the c-suite says they are investing for the future. We think this may present a good buying opportunity. We never thought we’d be talking about a FAANG as a value stock!

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