Are Tech stocks in a BUBBLE?
NASDAQ tech stocks like Apple got SLAUGHTERED today. Is this indicative of an UNDERLYING TREND? Are we in a BUBBLE? Do you the rest of you monkeys think the market, especially the tech sector, is SYSTEMICALLY OVERVALUED right now? Should I just invest in a MARIJUANA ETF instead?
Discuss!
People with money should know what to do with their money.
Do you LOVE typing in all caps? Do you think this makes your post look IMPORTANT? Like people can HEAR you SHOUTING as you TYPE?
DISCUSS!
I AM in the PROCESS of SHORTING APPLE and Amazon and TESLA. They have YET to UPEND and DISRUPT the INDUSTRY.
Tech bubble burst - how & whom to sell information. (Originally Posted: 10/30/2016)
I know when and how tech bubble will burst. How do i reach people/funds who can make lots of money using this information? I was working on technology for almost 6 years and by accident i discovered bubble and realised how big it is.
Solid facts that i have right now: - it will happen in more than 5 years and less then 10 years from now (i have precise date) - i can tell you exacly what will happen - so you can use this information to make investment decisions - very advanced technology so you can prove my findings and compare with market (not even NASA has this type of technology) - legal documents - bubble is worldwide, it will affect every tech company from microsoft to very small startups in significant way - many companies will bancrupt
My assumptions & calculations: - information how company that is aware of this bubble is changing it's investment strategy - how this company profit tens of billions USD on this bubble - approximetly >15mln people will loose their jobs after burst - global market worth globally 430B USD will shring approx by 90% - i am tech guy, so it would take economist to check if it is correct - VC investment bubble is small part of the bubble i had found
Something that right now cost 3.8mln USD will cost 60k USD or less in the future and nobody expects that.
How much my informations might be worth for investments funds?
We get it, you just watched The Big Short.
@CHECK6 - that is correct, after watching this movie i realized that it can be my second bussiness model
"How do i reach people/funds who can make lots of money using this information?"
Well you found the right people that can use this information...so what you got?
are you Elon Musk? if so we can certify your account
Website Stocks: The New Tech Bubble (Originally Posted: 02/07/2013)
There has been a lot of talk this year about upcoming tech IPOs, and despite the performance of Facebook (FB), interest is still high. Investors are speculating about at least 17 stocks (link) , which include Living Social, Twitter, and Box. Recently, Twitter was trading on the secondary market at a valuation of $10bn (link) .
When looking at the current performance of these “Web Techs”, I have to wonder if we are starting to see the creation of a new stock bubble. Although some of these websites are doing consistently well and seeing increasing revenue, they are still over valued by traditional standards. When considering the academic approach that a stocks price is the discounted present value of all future dividends, almost none of these valuations make sense.
Certainly, a company in the growth stage should reinvest revenue as opposed to paying dividends, but still. AAPL has a P/E of around 10.2, while FB has a P/E 2,867…does it really make any sense to buy stock in company whose sole source of revenue is internet advertising instead of stock in a popular company that makes a number of high end products?
I personally don’t think that these one product websites should be valued in the billions of dollars. I also don’t understand how some of these companies are going to sustain current usage levels and not become susceptible to a declining user base ( see WhiteHats post about FB here ).
Are investing in these Web Techs a silly move that ignores fundamental valuation practices? Or does growth potential really justify such large valuations?
I would be deeply suspicious of investing in a company like Facebook or Twitter. I mean, at some point, your valuation is based on current expectations of future popularity, which doesn't sit well with me*.
If it's a technology company that people spend money on, then I could see the argument going either way. Sure, Amazon appears to be, by all historical metrics, overvalued. However, take what's happening in technology (and more generally, the 'Software Eating the World' storyline) to its logical conclusion, to a world where Amazon has demolished the business models of traditional retailers. In that world, it's not simply a matter of slapping a historical P/E multiple on Amazon's 2013E earnings and calling it a day -- not if they're the only player left. (I am obviously alluding to this extreme for elucidation purposes, not because I believe that this is necessarily going to happen). In some sense, you could argue that Amazon's valuation is defensive, fueled by investors who don't want to be caught with their pants down when Macy's goes out of business.
*This would seem to preclude me from investing in a lot of consumer companies, but I would argue that there's definitely a line between investing in Facebook and investing in Coke-Cola (although it's entirely possible that the main difference is simply a matter of time horizon).
I kind of want to short OSTK. I just don't see why they should exist in a world with Amazon (and even EBay). They have been badly lagging peers, and I don't see why you would use them as a retailer or a consumer.
But it's expensive to borrow, I don't see a near term catalyst, and seems to be hanging in there.
what about netflix. thats a bubble stock too. and ebay and google are into high valuation territory, both trading well over 20 p/e ratio, and most of the google's smartphone is a losing business. ebay's business is problematic due to the high fees making it less worthwhile to use it
Crisis 101: Tech Bubble. Are we in one or..? (Originally Posted: 09/17/2015)
There has never been a better time to start a business (except maybe during the .com boom). With immense amount of capital flowing into the startups and tech sector, great and valuable ideas have a relatively good shot at securing funding.
Funding and Tech
In fact, according to CNBC, in the most recent quarter, VC firms put out about $17.5 billion worth of investments. This has been the largest capital infusion in start-ups since Q4 of 2000, during which VC firms poured $21.97 billion into different investments. Moreover, if you have ever wanted to have a $1 billion company, it has never been easier to do so.
According to TechCrunch:
If that wasn’t enough to make you quit your Analyst stint, check this out:
Head to SF?
So, I guess it’s probably a good idea to head to the valley?
Depends…There are two schools of thought.
One school of thought says that there is no bubble while the other says there is.
No Bubble
Andreessen Horowitz, one of the leading Venture Capital firms, argues that there is no tech bubble. They claim that most of the large and sizable investment are being poured into start-up companies in their later stages where increasingly larger amounts of capital are required. Moreover, they argue that most unicorn start-ups are trying to delay IPO and are trying to raise as much money as they can before hitting Wall Street.
Yep. We're in a Bubble
However, on the other hand, there is a growing faction that is voicing concerns about the forming tech bubble.
Evan Spiegel, whose company, Snapchat, has a valuation of $15 billion, has added that years of near-zero interest rates have led to people to take on normal-than-riskier investments and that a correction is on the horizon.
Fred Wilson of Union Square Ventures, who is known as New York’s number one VC, has said that, “We have multiple portfolio companies burning multiple millions of dollars a month” and that “At some point you have to build a real business, generate real profits, sustain the company without the largess of investor’s capital, and start producing value the old fashioned way…”
Benchmark Capital partner, Bill Gurley has gone on to say that “We’re in a risk bubble…We’re taking on, in these startups, these … so-called unicorns, a level of risk that we’ve never taken on before in the history of Silicon Valley or startups”.
So, monkeys, what do you guys think? Is there a tech bubble happening and should investors start cashing out before the storm? Or are we in for a smooth ride, looking forward?
I'm pretty sure we're in a bubble, but it won't be as dire as what Gurley implies publicly.
The truth is that too much capital has been flowing into venture capital. When early-stage funds are raising billion-dollar rounds, and when Series A rounds (especially if they're the first institutional rounds) are topping 20-30 million dollars, it's typically a warning sign that things have gotten out of hand. Pre-product, pre-revenue companies should not be valued at 50 million dollars.
At the same time, some companies that have garnered unicorn status are truly revolutionary. Uber will not only change the taxi cab business, but it will change the way we view car ownership as a whole. Several prominent people have done the math and concluded that Uber is actually cheaper than owning a personal vehicle, especially in cities where parking is prohibitively expensive. Airbnb is changing the way we view accommodation. They sell the message of friendliness and reliability, but their actual value proposition is cost. They're cheaper than hotels (personal is almost always cheaper than institutional), and therefore they will retain their popularity.
Snapchat's valuation makes me pause, but think about their traction. They have unbelievable engagement with pre-teens and teens. Kids who grow up using visual messaging systems will default to visual instead of textual. Snapchat, in this regard, has real potential to cause substantial shifts in the way we communicate. The company's philosophy is outlined in this video:
Gotta give it to Evan Spiegel there - he sold me on the vision.
We're moving into a mobile first world. If you read Mary Meeker's report, you'll see a massive, profound shift away from traditional media toward what is now considered 'new media,' optimized for our always-connected, impatient, demanding, lazy selves. Smartphones have enabled massive changes in the way we do almost everything, and as market penetration grows, so will the number of people seeking alternative solutions to everyday problems.
The big picture is simple - technology is no longer just the technology industry. Slowly but surely tech has seeped into multiple verticals, and will soon directly impact ALL of them. Amazon has disrupted the consumer/retail and logistics industries, Apple, Google and Netflix have turned to telecom, Uber is disrupting transportation, and Airbnb is disrupting hospitality. There are other examples in other verticals.
If we can believe Marc Andreessen and his software-eating-the-world philosophy, we can be assured that this is no ordinary bubble. We're not dealing with dot-coms that add no value. We're dealing with a very real movement catalyzed by constant connectivity and an increasingly on-demand, user-experience focused economy.
But there's a classic article that Seth Klarman referenced in Margin of Safety - the article stated that there was so much capital flowing into storage technologies that there was no way the VCs would profit in the end. I feel like that's what is happening again. There's so much capital in venture capital that firms are making stupid investments. Only the top firms will come out on top when people get back to their senses.
Lov'd this. +1SB.
Someone brought to my attention, that because of things like Instagram, Vine, Pinetrest and Snapchat the kids/adults under the age of 25 are very much more visual learners, and it has massive implications for everything.
Wanna know what I think could rival Google (not literally but at least put up a substantial fight) a search engine that when you type in your search option, it didn't bring up descriptions and the title, but rather something in bubble form showing images of the websites, maybe showing the instagram page, recent tweets and blah blah blah.
But a more visual way to search which appeals to the younger generations and those which are coming up.
View my amateur mock up below: http://s30.postimg.org/u5si8ix1t/WSO.png
However with more options and various bubbles, maybe even a bit more disorganized and shaped with large bubbles and small bubbles due to web traffic. Just an idea but I've always though google is great at searching and giving you what you want, but just wish it'd give it to me the way I want it.
very interesting thoughts guys...user centered design is definitely taking over. Why we're bringing on a UX / UI design expert soon for WSO! We want to delight the WSO users, not just for the site to "work" :-)
Looking at some of the major tech companies they're innovation and great, however they have a flawed business model which heavily relies on advertisement. This constrains them as they are at risk of scaring away customers if they go too far. While many do have sound business models the metrics do not support the valuations. Just a few examples-
Twitter: P/E Current: -28.91 Price to Cash Flow Ratio 265.31 Enterprise Value to EBITDA -49.91
Amazon: P/E Current -1,036.29 Price to Cash Flow Ratio 20.96 Enterprise Value to EBITDA 54.90
Facebook: P/E Current 85.76 Price to Cash Flow Ratio 38.09 Enterprise Value to EBITDA 40.04
Splunk: P/E Current-32.71 Price to Cash Flow Ratio 59.50 Enterprise Value to EBITDA -33.51
Be careful with some of those numbers - a P/E with negative earnings is completely arbitrary unless you can derive the source of the loss. The P/S for those three are going to be slightly more informative.
Specifically, it appears Splunk has been financing growth with earnings, as they have relatively low debt and high expenditure in R&D/marketing. Note the 41% and 46.4% YoY growth from 2014 and 2013 respectively. I don't know anything else about their business, however, and frankly they seem out of place in a list with the other three.
yeah, I agree with you that the valuations are sky high for most of these, but P/Sales ratio is a lot more meaningful vs. showing a negative P/E or EV/EBITDA multiple (which means nothing since if/when the earnings ever turn positive at $.01 of earnings, these P/Es will be positive and extremely high)....
Take Amazon for example...you could have said the 2.6 P/S ratio was super high in 2011 as well...it dropped to a low of 1.5 early this year and has gradually come back to 2.6 peak...but it's been growing like a BEAST for years. I think looking at these multiples it's just a clear indication that the market thinks these companies are going to have insane growth over the next X years....the reason Twitter has crashed so hard is because that growth (specifically user) has come under pressure and it's why I think Facebook is grossly overvalued...but don't think I'm dumb enough to short these right now when the FED can't even raise rates 0.25bps
FREE MONEY!!!!!
This could end badly if things get further extended (I don't think they will and as a whole the market hasn't really become "disconnected" from fundamentals like in the past...at least not yet!)
Yes we are in a tremendous Vc bubble, one word can describe it for you: surveymonkey. Look up how much debt and equity they have raised since inception.
Also Uber is a Ponzi Scheme. They are like the Friendster of the car sharing realm.
A16z says there is no bubble because it's not in the stock market and not as much money involved as 99. The truth is that the bubble is in the Vc market and I think more actual equity injection is happening now, as opposed to ipo investors buying out vcs. so it's had an even bigger impact in terms of jobs etc.
Just how big is this tech bubble? (Originally Posted: 02/19/2014)
FB buys Whatsapp for a ridiculous premium
http://online.wsj.com/news/articles/SB100014240527023049142045793934520…
The saddest part is that What's App offered an add-free version for $1 that was well worth it. Now, you can bet that will be much, much higher, if even available. Facebook is going to take your data and probably sell it to marketers of bullshit you'd never want.
36 engineers! I mean, wtf is going on here?? In what universe do you sit and think, hey, we should spend $19 billion dollars to acquire some app that 36 hipsters created instead of developing our own version in house for like, I dunno, $100mm... (100 high paid FB engineers for 2-3 years). The social media bubble is about to burst, I can feel it.
CAN SOMEONE EXPLAIN TO ME HOW WHATSAPP MAKES MONEY? IT DOESN'T EVEN HAVE ADS
Who's the advisor on this deal?
Allen & Co. striking gold!
http://www.businessinsider.com/why-facebook-paid-19-billion-for-whatsap…
Provides some insight on why FB paid $19 bn, but that is still a ridiculous price to pay. I thought Instagram was expensive. Whatsapp is bought for 3x Blackberry's market cap, and to think of it, BBM was the dominate messenger application just a couple of years ago. If only they had focused on its messenger service and/or enterprise customers...
I'm curious, how do these TMT groups value these types of deal? There aren't any precedent transactions, DCF is impossible to do, public comps? Good luck with that... They are left with synergy analyses for which the sky's the limit???
w1420, there was (purportedly) a competing $10B offer from Google. Even if Facebook did overpay, what you're saying (and what almost every talking head is implying) is that Mark Zuckerberg, the person who has made the most money in the shortest amount of time ever, is an idiot. I don't think that's the case, and I think the valuation is justified when you consider that Zuck is trying to get his fingers in every communication platform pie in existence. At 450MM+ MAUs, with 70% of them being DAUs and the MAU count growing by 1MM+ every day, I'd say he made a pretty good bet and paid a premium to what were likely a host of other competing bids.
I think MS Tech did a phenomenal job representing their clients, and if anyone should take heat it's Allen & Co. However, since this was a competitive bidding process my guess is that Zuck wanted WhatsApp badly and went to his board to get approval, got it, then gave Allen & Co. the mandate to do what it took to get the deal done. I can't think of a client on the face of the planet that would revert to their advisor and say, "Geez, you did a terrible job because you made too much money for me." If anything this deal is a huge feather in their cap. Even in the midst of massive multiple expansion in tech, selling a company for ~$40/user is no small feat. Not to mention the $3B in RSUs gives the team significant motivation to continue to build out the product and make it successful. How's that for an earnout?
From Dan Primack "FORTUNE -- Earlier today I appeared on CNBC to discuss Facebook's (FB) stunning $19 billion purchase of WhatsApp, the mobile messaging platform that has grown from 200 million users to over 450 million users in just the past nine months. In short, the hosts wanted to know if it was a smart or dumb deal. In all honesty, it's WAY too early to say. But I wouldn't bet against Mark Zuckerberg just because this deal feels oversized at first blush. Remember, so did Instagram. What does seem clear, however, is that this deal should seriously concern some other players. Like Google (GOOG), which spent more than a year (unsuccessfully) trying to buy WhatsApp. Or rival messaging apps like Kik, Snapchat and WeChat -- all of which just lost a major suitor, and now may need to battle it out to be number two. Or current wireless carriers, who make a fortune off of SMS (the functionality that WhatsApp virtually gives away for free). Or Apple (AAPL), if only because some of its shareholders may now feel that it has totally missed the boat on a giant new opportunity, despite having the resources to have bested Facebook. Anyway, here is the CNBC conversation with myself and Business Insider's Henry Blodgett..."
http://finance.fortune.cnn.com/2014/02/20/did-facebook-make-a-mistake-w…
As always with things related to valuation, I recommend everyone read Professor Damodaran's analysis of the Facebook/WhatsApp deal: http://aswathdamodaran.blogspot.com/2014/02/facebook-buys-whatsapp-for-…
In a nutshell, Damodaran argues that the valuation is difficult to justify from an "investor" point of view, but from a "trader" perspective, may be pretty good.
Who's buying the shares?
Why can't the institutional investors who spend all their time analysing these companies and have vast knowledge about what is happening in these companies and in the market see what is so plainly obvious to a group on an internet forum largely made up of college students and early stage professionals?
Not saying I agree with these crazy valuations but it is easy to throw out the "Bubble" argument without penetrating the surface and understanding what is really happening.
Aswath Damodaran's post on the whats app transaction is one of the most well reasoned and sensible things I have read about this.
Also worth keeping in mind that investment value and fundamental value are two different things.
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