Displaying items by tag: tech

(San Francisco)

Tech stocks have two very unappealing characteristics right now. They are at once both very expensive and increasingly vulnerable, as evidenced by their major selloff over the last week and a half. However, there are cheap tech shares out there, and Barron’s wants to share them with you. The five cheapest tech stocks in the Nasdaq 100 are Micron Technology, Western Digital, Seagate Technology, Lam Research, and Applied Materials. Their P/E ratios range from a low of 5.2x to a high of 11.9x.

FINSUM: Just a note of caution—these stocks were not selected to be good value, they were presented solely on the basis of valuation, so the multiples may be very representative of the quality of their businesses.

(San Francisco)

Facebook had an absolutely historic plunge last week, losing $120 bn of market cap in an afternoon. It has not fared so well since either, as many of its tech brethren have also seen big losses (like Twitter and Netflix). There are also mounting fears about a fundamentally darker future given the scandals and controversies it has become involved in. All that said, the stock still looks like a buying opportunity, at least according to some Wall Street analysts. The key to playing the company is not to wait for signs of margins and revenue stability. “Many investors prefer to wait for the appearance of margin stability … We understand this, but stocks tend to bottom and recover well ahead of margins and trade at much higher multiples when they do”, says a stock analyst.

FINSUM: Investors really need to contextualize this loss. Revenue growth rates came in 1% below expectations, leading to a massive loss. We think there is a good buying opportunity here.

(New York)

The FT ran an article today looking at the tech meltdown from an angle no one else is, and it is definitely worth paying attention to. Their worry is how ETF issuers are going to be able to offload shares of tech giants quickly enough to match benchmarks. For instance, Facebook lost $120 bn of market cap last week, and it will be difficult to source enough buyers to unload all that stock without roiling the market further. The overall point of the article is that trouble in tech might cause the dreaded “liquidity mismatch” issue in ETFs.

FINSUM: It seems like this problem is already rectified for last week’s fall, but the overarching argument is that any falls in FAANG stock prices are going to be exacerbated by large amounts of forced ETF selling. This could explain why the losses have been so steep.

(New York)

Just a day after Citi and Goldman Sachs warned of a market correction, Morgan Stanley has gone on the record with an even more stark warning. The bank says that an even stronger correction than February is looming and that the selloff is is imminent and has “just begun”. MS says that we are in the midst of a “rolling bear market”, and that almost every sector has been de-rated. Investors are unprepared for the big losses in tech, and the market has little to look forward to. Morgan Stanley says the drop will be bigger than earlier this year “if it’s centered on Tech, Consumer Discretionary, and small caps, as we expect”.

FINSUM: This is an even more stern warning than what we ran yesterday, and more specific too. Tech is already having a meltdown, but what really caught our eye was the threat to small caps, which have been on a great run.

(New York)

A lot of worries have been centered on the tech sector. While many are upset about the losses currently being felt, and even bigger fear is that tech might drag down the whole market. Well, Goldman Sachs says investors shouldn’t be too worried about that. The reason why is that while tech makes up a large part of the market’s current capitalization, earnings growth forecasts are much more broad-based, which will limit the fallout to the market as a whole. Goldman summarized their view this way, saying “From a fundamental perspective, narrow market leadership typically reflects narrow earnings strength, which is often a symptom of a weakening operating environment … Unlike past episodes of narrow market breadth, the earnings environment today appears healthy and broad-based”.

FINSUM: Goldman points out what should be a nice buffer, but we are more worried about the emotional, rather than rational, reaction of investors to falls in tech. That said, broad-based earnings strength is a good support.