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I came across this list of crashed big cap tech stocks on Twitter on April 23:
I’ve analyzed every one of those stocks over the last year. When thousands of stocks are down 70%-80% or even 90%, there are going to be some good bargains out there.
So I came into the office the next day and put together a list of stocks that I call my “Casket of Big Cap Crashes” (not basket, but casket, see?). Then I built a spreadsheet that incorporated their trailing 12 month revenues and gross margins and operating expenses. I took the average of analysts’ growth estimates for the next two years posted on Yahoo Finance and rounded them down on the assumption that their numbers are too high — I want to use very conservative estimates. Then I divided each respective market cap with those number to estimate what the real P/E for most of these stocks might be in a few years.
You can see that several names, including Meta Platforms Inc. FB, -2.56% are trading at very low price-to-earnings ratios when we estimate them three and five years out. Here’s a closer look at the featured names (the bolded ones are the ones I own):
|Company||Ticker||P/E – three years out||P/E – five years out||Comment|
|Verizon Communications Inc.||VZ||6.8||6.7|
|Intel Corp.||INTC, -6.94%||7.9||7.4|
|Roku Inc. Class A||ROKU, +1.39%||11.1||7.0|
|JD.com Inc. ADR Class A||JD, +6.66%||16.0||10.2|
|Qualcomm Inc.||QCOM, -5.74%||11.4||10.3|
|Meta Platforms Inc. Class A||FB, -2.56%||12.9||11.1|
|PayPal Holdings Inc.||PYPL, -4.52%||13.9||10.6|
|Alphabet Inc. Class C||GOOG, -3.72%||13.2||10.3|
|Uber Technologies Inc.||UBER, -4.08%||16.8||13.0||Using 2026/2028 estimates.|
|Spotify Technology S.A.||SPOT, -1.00%||19.4||12.9|
|Shopify Inc. Class A||SHOP, -3.71%||25.4||14.0|
|SolarEdge Technologies Inc.||SEDG, -1.57%||26.2||16.9|
|Zoom Video Communications Inc. Class A||ZM||21.4||17.1|
|Amazon.com Inc.||AMZN, -14.05%||23.0||18.0|
|Rocket Lab USA Inc.||RKLB, -1.73%||20.5||17.7||Using 2026/2028 estimates.|
|Wayfair Inc. Class A||W, -7.73%||29.9||18.5|
|Tesla Inc.||TSLA, -0.77%||31.0||17.3|
|Nvidia Corp.||NVDA, -6.24%||29.5||21.8|
|Block Inc. Class A||SQ, -4.87%||34.7||23.0|
|Rivian Automotive Inc. Class A||RIVN, -6.03%||56.1||28.1||Using 2030/2032 estimates.|
|Netflix Inc.||NFLX, -4.59%||43.1||35.3|
|Unity Software Inc.||U, -5.03%||123.1||34.7||Using 2026/2028 estimates.|
|Workday Inc. Class A||WDAY, -4.07%||147.1||70.9|
|DocuSign Inc.||DOCU, -5.12%||268.5||110.7|
|Snowflake Inc. Class A||SNOW, -7.68%||N/A||629.2|
|Teladoc Health Inc.||TDOC, +0.75%||N/A||N/A|
|Twilio Inc. Class A||TWLO, -5.97%||N/A||N/A|
A P/E marked “N/A” indicates that a company is expected to post a net loss for that year.
The good news is that a lot of stocks are not terribly expensive if they come anywhere near delivering on their business plans for the next three to five years. The bad news is that many of them are still expensive. I expect Unity and others to grow faster than the assumptions I put into these spreadsheets, so I am holding onto that name for now.
You might notice that I bolded Roku Inc. ROKU, +1.39% Indeed, I have started building a new position in this stock. I plan to give myself plenty of room to buy more if it continues to crash with the broader speculative tech market.
Snowflake Inc. SNOW, -7.68% and Twilio Inc. TWLO, -5.97% are great companies and I would like to buy them at some point, but as you can see in the chart above, they are very expensive stocks and will probably still be so in another five years unless they grow much faster than my conservative estimates. Netflix Inc. NFLX, -4.59% is probably still too expensive, but as the company is still the de facto leader of The Streaming Revolution, I’m willing to give it some more room. I’d be a strong buyer of NFLX near $150.
On that note, I’ve also sold all my Ether ETHUSD, +0.83% from my hedge fund (I still own a little bit personally that I’ve owned for years). I think the price of ETH has to come down at some point as the economics of “gas fees” are too high for most businesses. This is creating all kinds of competition for Ethereum’s smart contract platform. Everybody, including Ethereum’s founders, know this and they are supposed to do a fork to address this at some point, but they keep putting it off, perhaps to try to keep ETH as high as possible for as long as possible even if its going to hurt ETH’s long-term prospects.
Cody Willard is a columnist for MarketWatch and editor of the Revolution Investing newsletter. Willard or his investment firm may own, or plan to own, securities mentioned in this column.
Source: This post first appeared on http://marketwatch.com/