I don’t know when they will collapse; but I can all but guarantee that they will. If you point towards some recent deals, like TRLA or CNQR, they were done at and below 10x sales. This market is riddled with a group of stocks with valuations we have not seen since the dot com bubble.
There have been zero instances, aside from biotech FDA bonanzas, when a high valuation tech stock simply grew into its valuation, gracefully. A perenniel “high valuation” stock, CRM, is trading 7x sales and at its highest point of “crazy price to sales” status, it only traded 14x–back in 2005.
The following stocks have 50-75% downside potential.
CSLT
TWTR
SCTY
WDAY
FB
Z
FEYE
SPLK
ARMH
YELP
ATHM
CMCM
NOW
ZEN
DATA
WBAI
QUNR
Even the ludicrous TSLA is trading 12x sales. Bear in mind, the above stocks are all trading above 15x sales and I own a few of them, super bullish on names like YELP and FB for the long haul. But I am not disillusioned when looking at these stocks; I know what I am getting involved with.
It comes down to this.
Does the bubble continue and if so for how long? That’s all that really matters. When this run is over, the high valuation stocks will correct and resemble the endless names listed in the old tech cemetery, indexed by some old crowd favorites like CSCO, SCMR and JDSU.
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I’ve been trying to forget JDSU for 10 years, thanks for bringing it up. Ugh.
Well, there goes my hope that Chinese internet stocks were already pricked out of their bubble and still have outsized growth prospects. I mean, BABA was worth 40 billion just two years ago, ya know?
I shall proceed to buy RGR and will be headed out back to the sound of a solitary bang. Out with a whimper, my friends. With a bang and a whimper just to confuse Mr. Eliot.
I’ve noticed you always start playing classical music when you are winning. Very Hannibal Lector of you.
Ohhhhhh….scary
Does anybody remember Jozef Straus with his red beret? Once they started to do acquisitions people realized secular growth companies don’t do acquisitions. Stock deflated 95%. CNQR just sold for a price lower that their march high. Listen to The Fly. It is game over in these stocks. WDAY is going to a $4 billion market cap. You have been warned.
FB printed all time high today.
sell soon
I am long FB from 32
Funny how people pump stocks one week and then all of the sudden the sky is falling. Maybe a correction but there are good companies out there worth buying right now also.
Global Crossing; one that caught me among others.
Don’t forget Worldcom.
You guys need a dose of “OA Magic” to cheer you up….geeez
so why were you buying FEYE in the 70’s?
I’d like to see asset prices come down, stocks, commodities, real estate, etc. The part I don’t want to see is the general population creating a massive civil disturbance when their fantasy world collapses. I think the wealthy and experienced traders will survive a price collapse OK. The wealthy should be able to maintain their status quo, unless the situation accidentally goes out of control.
The wealthy own the government, the media, and the cops.
I guess that’s enough to maintain the status quo.
YELP is worth a billion dollars, and that is if you take a really optimistic view of their future. Maybe just maybe someone would buy them at 1.5B at a premium for strategic reasons….but they will never make enough money to justify such a valuation. I promise you.