Are big tech stocks attractive after this selloff? – Stock Market News



With interest rates rising at a stunning clip and the US dollar smashing everything in its path, stock markets are under tremendous selling pressure. Even shares of big tech companies have been caught in this storm. Some of those such as Amazon and Google are becoming attractive at these valuations, while Microsoft and Apple still appear expensive. 

Tech troubles 

When investors refer to big tech, they think of companies such as Apple, Microsoft, Amazon, Google, and Meta Platforms. These titans have grown to dominate their respective industries, have enormous ‘moats’ in the sense that it is difficult for competitors to replicate their products, and their digital nature means the cost of acquiring new clients is very low.

As such, they have generated astonishing returns over the last decade, although their performance this year has been mixed. The problem was the spike in interest rates, which encouraged traders to dial back their risk-taking behavior, compressing the valuations on riskier assets.

That sparked a selloff in equity markets and an appreciating US dollar added fuel to the fire. Since these companies generate around half of their sales outside of America, a stronger dollar can have a huge impact by making the services they sell more expensive for foreign consumers.

Meta gets smoked

Leading the decline was Meta Platforms, the parent company of Facebook and Instagram. Shares are down almost 60% this year, imploding on concerns that user growth is stagnating and competition is intensifying with TikTok bursting into the scene.

Meta makes its money mainly through advertising but because of some privacy changes from Apple, its ads have lost their ability to target users effectively, decreasing demand for those ads.

Most importantly, the company is investing heavily into building the Metaverse, which is seen as a colossal risk. Investors are worried CEO Mark Zuckerberg is pouring endless amounts of capital down a rabbit hole that may never generate any returns.

The good news is that the valuation is attractive. Meta shares are currently trading at 12.7 times forward earnings, which is 25% cheaper than the market. If management curtails spending on unpopular investments and manages to recalibrate its ads, this could be a turnaround story.

That said, the chart is still ugly. Meta shares are currently testing their covid lows and if they slice below this region, investors might have an opportunity to buy even cheaper shares near the 2018 bottom.

Amazon and Google seem solid 

Amazon commands the most expensive valuation in this list, but only looking at that is misleading. After the pandemic, Amazon went on an investment rampage in order to expand its warehouse infrastructure and ensure that its cloud services division can keep expanding.

These investments caused free cash flow to evaporate and made the valuation appear horrible at first glance. Yet they will pay dividends down the road. Investors understand that Amazon can turn on the profits switch whenever it wants, simply by cutting back on spending.

Google is a different beast. At 17.2x forward earnings, the valuation is already quite appealing and the real number is even lower since the company holds around 10% of its market cap as cash sitting on its balance sheet.

While its bread and butter is still advertising, it is also one of the big three players in the cloud sector alongside Amazon and Microsoft. Considering that we are still in the early stages of cloud adoption, this could ensure solid growth for years.

Microsoft and Apple enjoy premium

Finally, both Microsoft and Apple appear expensive. In terms of earnings per share, Microsoft is trading at a 33% premium to the S&P 500, which increases to almost 40% for Apple.

To be fair, quality companies usually enjoy a higher valuation than the overall market. They both have share buyback programs and strong growth drivers, with Microsoft leading the charge in cloud and Apple preparing to get into virtual reality.

Still, a premium valuation requires premium growth, which hasn’t been the case lately. In the latest quarter, Microsoft grew its earnings by only 2% from a year ago, while Apple’s earnings fell by almost 8%. That’s before accounting for inflation, so the real losses were even greater.

If the lackluster performance continues, this premium might not persist for long. With Apple the risks are even greater considering its exposure to the Chinese economy, which is dealing with a property crisis.

All told, this is a tough environment for stocks. The economic data pulse is slowing, interest rates are rising, and valuations are still not cheap. That said, Amazon and Google are worth a second look if the market drops further, while Microsoft and Apple appear too expensive in the absence of growth.

免責聲明: XM Group提供線上交易平台的登入和執行服務,允許個人查看和/或使用網站所提供的內容,但不進行任何更改或擴展其服務和訪問權限,並受以下條款與條例約束:(i)條款與條例;(ii)風險提示;(iii)完全免責聲明。網站內部所提供的所有資訊,僅限於一般資訊用途。請注意,我們所有的線上交易平台內容並不構成,也不被視為進入金融市場交易的邀約或邀請 。金融市場交易會對您的投資帶來重大風險。

所有缐上交易平台所發佈的資料,僅適用於教育/資訊類用途,不包含也不應被視爲適用於金融、投資稅或交易相關諮詢和建議,或是交易價格紀錄,或是任何金融商品或非應邀途徑的金融相關優惠的交易邀約或邀請。

本網站的所有XM和第三方所提供的内容,包括意見、新聞、研究、分析、價格其他資訊和第三方網站鏈接,皆爲‘按原狀’,並作爲一般市場評論所提供,而非投資建議。請理解和接受,所有被歸類為投資研究範圍的相關内容,並非爲了促進投資研究獨立性,而根據法律要求所編寫,而是被視爲符合營銷傳播相關法律與法規所編寫的内容。請確保您已詳讀並完全理解我們的非獨立投資研究提示和風險提示資訊,相關詳情請點擊 這裡查看。

我們運用 cookies 提供您最佳之網頁使用經驗。更改您的cookie 設定跟詳情。

風險提示:您的資金存在風險。槓桿商品並不適合所有客戶。請詳細閱讀我們的風險聲明