Dear Reader,
Based on common valuation metrics like Price/Earnings, Price/Book and Price/Sales ratios information technology stocks globally and especially in the US are overvalued. If not in a bubble territory.
Why? Information Technology is profoundly changing our lives by saving people and companies time, money and effort. Walls Street investment banks constantly publish upbeat equity research reports on various technology companies which manage to convince portfolio managers of large asset management companies and hedge funds that information technology companies will continue to surpass revenue and profit expectations and their stocks prices will continue rising.
This upbeat story is caught up also by individual investors who together with asset managers and hedge funds perpetuate the growth cycle of technology companies' stocks.
Sooner or later, the investment community will all of a sudden realize that technology stocks are overvalued and they will rush for the exits into the next opportunity which currently seems to be value stocks.
Many market participants think Wall Street investment banks' research reports are biased upwards so as to help drum up brokerage and investment banking business. Hence the few sell recommendations produced by Wall Street equity research analysts. Alternative explanation could also be the positive inclination of human nature.
In short, information technology stocks are overvalued anywhere between 25 % for extremely large capitalization stocks like Apple and Amazon, 30 % to 40 % for large capitalization stocks like NVDA and Netflix and 50 % or more for mid capitalization stocks Dropbox and 60 % for small capitalization stocks.
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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