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Chip stocks look like good bets in th new world for tech stocks.
Maika Elan/Bloomberg
Tech stocks finally showed a little fight last week, aided by an impressive batch of earnings reports. But the sector remains battered. The Nasdaq Composite is down 16% over the past two months—and beneath the surface, the damage is considerably worse. Among Nasdaq stocks with market caps over $1 billion, one-quarter are down 30% or more since mid-November. More than 60 Nasdaq stocks are down 50%-plus, including familiar names like Overstock, Affirm, Robinhood, DocuSign, and Etsy.
While stock prices are a lot lower, they are hardly de-risked. As the Federal Reserve made clear last week, rate increases are coming, likely by March. Higher rates are bad for the kind of high-multiple growth stocks that led the market over the past two years.
Consider it your mantra: Lower-priced stocks aren’t the same as cheap stocks.
Zoom Video Communications (ticker: ZM) is down almost 70% from its 52-week high—but it still trades for 10 times expected sales for the current year and more than 30 times projected earnings. Cheaper, not cheap.
Shopify (SHOP) shares have been cut in half, but still trade at more than 18 times current year sales, and 108 times earnings. Cheaper, but not remotely cheap.
Etsy (ETSY), down 53% from its highs, trades for eight times sales and close to 50 times earnings. Cheaper, sure. Cheap? Still no.
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