Dear Reader,
Technology stocks, software, seem to be eating the world. Technology stocks measured by mainly the Nasdaq Composite Index keep going up and outperforming the other main indices like the Dow Jones Industrial Average, Standard and Poor's 500, FTSE, DAX, CAC, CSI 300, Nikkei etc.
Why? I think there are two plausible explanations. One is that we are in a technology bubble. Simply the prices of technology stocks do not reflect reality. They incorporate too high expectations for future revenues and profits.
The other explanation is that due to the coronavirus COVID-19 pandemic the digital transformation wave that has gripped the globe in the last 20 years has accelerated and the total addressable market for technology companies has expanded significantly, basically in the last 4 months. People are working, shopping and communicating not from offices any more, but remotely from their homes. Companies are using more and more cloud services to store, process and analyze data and perform their main activities. Advertisements and other activities are shifting online with accelerating pace. All this expands the total addressable market for cloud services, software as a service, online shopping, search, social networks and computer and smartphone hardware companies. And this should translate in higher revenues and ultimately profits and dividends for technology companies which is reflected in their share prices.
Actually, I think the truth is split like we are 70 % in a technology stocks bubble and 30 % the rise of technology stocks prices is due to the expansion of their total addressable market. This implies that technology stocks are 30 % overvalued, in my humble opinion.
Disclaimer: The blogposts and comments on this blog and posts on social networks(Twitter, LinkedIn, Facebook etc.) are not investment recommendation, are provided solely for informational purposes, and do not constitute an offer or solicitation to buy or sell any securities. The opinions expressed on the blog are Petar Posledovich's. Petar Posledovich does not guarantee the accuracy of the information presented on this blog and social networks. The information presented is "as is".
Petar Vladimirov Posledovich is not liable for any investment losses incurred by reading and interpreting blogposts on this blog and posts on social networks.
Conflicts of interest: I may possess some of the securities, currencies or their derivatives mentioned in the blogpost and posts on social networks(Twitter, LinkedIn etc.)!
Respectfully yours,
Petar Posledovich
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