Conventional valuation don’t seem to matter much…when markets are on the way up. From Wolf Richter at wolfstreet.com:
This time, it’s different, say the strategists. So we’ll take a look.
In the bewildering wilderness of the most hyped Wall Street acronyms, we’re going to stick to FANGMAN – Facebook, Amazon, Netflix, Google’s parent Alphabet, Microsoft, Apple, and Nvidia – for the special moment. And the special moment is that the Nasdaq, or more loosely “tech stocks,” closed today at a new high.
But don’t worry. With regards to tech stocks, no matter how high they’ve soared, there is no bubble, based, believe it or not, on fundamentals, Goldman Sachs strategist Peter Oppenheimer and Guillaume Jaisson pleaded in a note, cited by Bloomberg. And the fun is going to continue, the said. And it’s different this time:
“Unlike the technology mania of the 1990s, most of this success can be explained by strong fundamentals, revenues and earnings rather than speculation about the future.”
“Given that valuations in aggregate are not very stretched, we do not expect the dominant size and contribution of returns in stock markets to end any time soon.”
“Leading tech companies today have become very large in terms of market value, but that reflects the significant growth of technology spending and its ability to displace other more traditional capex spending.”
So tech will continue to dominate, they argue, as everyone will have to buy it, including retailers as they try to escape the brick-and-mortar meltdown by shifting to e-commerce. And then there’s the whole huge promise of AI. They add:
“This ‘snow balling’ effect is similar to what was experienced during the industrial revolution where one technology led to another and caused traditional industries to spend more on technology to survive.”
Yes, Y2K comes to mind.
So let’s take a look at the non-bubble in the FANGMAN stocks. Here are their basic data as of Monday evening: Market capitalization, price-earnings ratio (P/E Ratio), annual revenue growth, annual revenues for the last full year reported, and price-to-sales ratio.
|Annual revenue growth
To continue reading: FANGMAN Stocks Are Not a Bubble, Pleads Goldman Sachs