The Tech Industry's Epic Two-Year Run Sputters (wsj.com) 24
Investors are divided about whether technology companies are set for a deep retrenchment or if growth is simply slowing from pandemic highs. From a report: The technology industry, which powered the U.S. economy during the pandemic and grew at tremendous scale during a decade of ultralow interest rates, is confronting one of the most punishing stretches in years. Global powerhouses and fledgling startups are feeling pain from a variety of economic, industry and market factors, spawning postpandemic turbulence in e-commerce, digital advertising, electric vehicles, ride-hailing and other segments. Companies that emerged as job-creating juggernauts in the past two years -- collectively adding hundreds of thousands of workers to their payrolls in engineering, warehouse and delivery jobs -- have begun to freeze hiring or even lay off employees.
Concerned that some of the forces that have propelled tech ever upward have begun to fade, investors have sent share prices for a number of companies, including Lyft and Peloton plunging on disappointing financial results or other news. The stocks of Netflix, Facebook parent Meta Platforms and Amazon.com all are down more than 30% this year, exceeding the more-than-13% drop in the S&P 500. Investors are divided on the question of whether the slowdown is temporary -- as well-positioned companies work through a period of stagnation after expanding ultrafast in recent years -- or if these are the early signs of a deeper retrenchment for the industry and its investors.
Concerned that some of the forces that have propelled tech ever upward have begun to fade, investors have sent share prices for a number of companies, including Lyft and Peloton plunging on disappointing financial results or other news. The stocks of Netflix, Facebook parent Meta Platforms and Amazon.com all are down more than 30% this year, exceeding the more-than-13% drop in the S&P 500. Investors are divided on the question of whether the slowdown is temporary -- as well-positioned companies work through a period of stagnation after expanding ultrafast in recent years -- or if these are the early signs of a deeper retrenchment for the industry and its investors.
Running out of other peoples money (Score:3, Informative)
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sshh, don't ruin my ponzi, Fonzi
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Valuations have gotten very frothy compared to profits. Look at Netflix. It was trading at 56 times earnings and people were still saying it's a screaming buy. Now it's down from nearly $700 to $177 and those investors are being carried out feet first, but they're STILL trading at 17 times earnings. Tesla still hasn't made a dime except for government subsidies and carbon credits and people are pretending it's a growth stock, claiming their best two years ever but not paying their shareholders a dividen
Just another Tesla hater (Score:4, Insightful)
The funny thing is you started out by actually being correct, but then go into a strange anti-Tesla rant that is not in any way accurate - Tesla has had actual earnings for a while now, and doesn't benefit much from subsidies at this point so those are real earnings [macrotrends.net] (last year's average EPS was $4.9).
The entire tech industry is filled with companies that have ridiculous valuations but you chose the one company that doens't deserve to be called out. So basically you just made your whole message look wrong, even though fundamentally it's correct.
Yes there are subsidies (Score:2)
Doesnt benefit from any subsidies? Both the fed and most states provide plenty of subsidies for electric cars. Would Telsa's sales be what they are if people werent getting $5-10k back? I don't think so.
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For nearly any company to succeed in the 21st century. In order for them to make make money, they are going to need money (often a lot of it) first.
For most companies, they can get that with a Business Loan, or Venture Capitalist. However with either of those type of way of getting money, there is a need to prove that you have a solid business plan, and a good way to make money.
These companies will often run for decades under massive dept, that they will slowly pay off with profits.
Then harrowed as winnin
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Would Telsa's sales be what they are if people werent getting $5-10k back? I don't think so.
Actually, we can say with certainty that you're incorrect because Tesla's customers have not been "getting $5-10K back" since 2019.
The bulk of the "$5-10K" you're referring to is the $7500 federal tax credit for purchasing an EV, but that credit is tied to manufacturer sales. Once a manufacturer sells 200K EVs—as GM and Tesla have—the tax credit begins an automatic phase out process, first to 50%, then 25%, then 0%. In Tesla's case, they crossed the 200K sales mark in July 2018, the phase out be
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Not until Q4 of 2021 (two quarters ago). After years of profiting only from carbon credits (given to Tesla by the government, which Tesla then sells to their competitors), they would only have been profitable since then. And it's funny how Musk suddenly wanted the subsidies stopped in December of 2021, after banking those subsidies for two decades.
So after all these years, without
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They're building new factories, with many other expansion plans; they're spending their money instead of paying dividends, which is what companies in a growth phase do.
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The PE ratio's have been suspiciously high for quite a while. It was pretty obvious we were due for a correction.
Some claimed "it's different this time, high PE's are not a worry". But similar was said about the housing bubble of the 2000's just after the dot-com crash. Many asked, "why isn't this mortgage thing also a bubble?" Creative responses were invented (sales shit), but in the end the fundamentals of investing came roaring back with a vengeance. Maybe someday "but it's different this time" may someh
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When I plan for my retirement 25-30 years from now, I use a 6% growth rate adjusted for inflation to estimate my 401k growth. That is a 500% growth over the next 27.5 years, adjusted for inflation. But I reduce the current S&P 500 to a P/E ratio of 15 before adding that multiple, which would put the current S&P 500 at 3000. So my forecasts assume an S&P 500 at an inflation adjusted value of 15k, instead of the 20k it would be if I assumed a 6% rate of growth from today's actual value.
The good ne
Misnomer (Score:3)
Theyâ(TM)re not investors, theyâ(TM)re gamblers.
Investors understand what theyâ(TM)re investing in and work to get more out of their money. Gamblers hope they get lucky, the price goes up, and they can unload it on someone else.
Thereâ(TM)s some grey area in between, certainly, but there are an awfully large number of people these days who feel that âoeinvestingâ is not correlated with the underlying assetâ(TM)s actual performanceâ¦
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Take Rivian. There is big demand for their new product, but they don't have the capacity to manufacture it. They sell shares to funding new factories to make more trucks. It's textbook.
As for deeply understanding the companies they're investing in a picking individual stocks vs just betting on general growth, I do not think us individual investors are in a position to do that. We invest in index funds. We are followers. Not sure it matters because we are essentia
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They're not investors, they're gamblers.
There is an aspect of gambling behavior in the stock market, but what venture capitalists are doing which props up tech valuations is not an example of this behavior. Venture capitalists are a result of too much money pumped into the system and concentrated into too few hands, and they need to find a way to invest that money. They really are investing in companies, and those companies are building something in the hopes of finding customers. It is highly speculative, but it isn't gambling.
In a more balanced
Maybe it's me... (Score:1)
But are Lyft and Peloton REALLY tech companies? I mean, Lyft does have their app, but, at their core they're a taxi service, right? Could Checker Cab become a tech company if they created their own app? And Peloton... An exercise bike with a screen and some sort of "cloud" connectivity? I would think a normal bike would be better, cheaper, and a hell of a lot more fun.
Obviously I'm showing my age, but, is the bar to become a "tech" company really this low? Are these companies really on par with Cisco, Dell,
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As it happens, Checker Cab does have an app: https://play.google.com/store/... [google.com]
Does anybody want to use it? That's a big question.
In the end, what is a tech company? If you define a tech company as a company with only purely digital products, then the category is indeed very limited. But if you include companies (like Apple) that have transformed the way we do traditional activities (calling, listening to music, etc.), then there's a case for categorizing Uber, Lyft, and Peloton as tech companies.
Cheap money is gone (Score:1)
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drop (Score:1)
i have a simple rule-of-thumb that works great for me, might not work for you: any sort of giveaway that describes itself as a "drop" contains nothing of value
Is 'Tech' only start ups? (Score:2)