Tag: tech stocks

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Tech stocks are getting hammered (again)

I have a run of internal meetings starting in 15 minutes, so we have to be quick, but tech stocks are taking body blows yet again today. A selloff earlier in the week had us taking note. Today cements our raised eyebrows.

And when we say tech shares are under attack, we are not only pointing out that DocuSign has lost more than 40% of its worth thus far today, or that the Nasdaq Composite is off 2.5%. SaaS and cloud stocks are off 6.5% today after declines earlier in the week. They are now in a technical bear market. That matters!

Yes, things could snap right back. But they may not. The first inning of a correction, or just another blip?

Context. Image Credits: TechCrunch screengrab

Keep an eye out.

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Tech stocks drop as Q4 begins; software shares, Facebook plunge 5%

What’s the opposite of stonks?

Shares of technology companies are sharply lower in the United States today, with the tech-heavy Nasdaq Composite falling 2.4% in early-afternoon trading.

Inside of the larger tech industry, things are even worse. The WisdomTree Cloud Computing Fund, essentially a way to trade the Bessemer Cloud Index as an aggregate, is off some 5%. The Bessemer Cloud Index tracks a basket of public software companies, which provide their services largely through hosted (SaaS) or on-demand (API) methods.

TechCrunch doesn’t bring you intraday trading updates much, but because these come on the heels of larger declines, the damage is starting to pile up.

The Nasdaq is off 7.7% from its recent highs. That’s not that bad. It’s not even a technical correction, a movement that requires a 10% decline from recent highs. A bear market, as a reminder, is a 20% correction from recent highs.

The SaaS and cloud market is in the worst shape, falling nearly 13% as of today’s declines. Public software companies are in a correction and are on their way toward a bear market if any more days like today crop up.

There’s more afoot, of course. Shares of social giant Facebook are off a little more than 5% after the company endured — even for it — a punishing news cycle in recent weeks. A whistleblower who leaked internal Facebook material came forward over the weekend, leading to another round of coverage that Facebook would like to forget.

Then, today, Facebook’s entire suite of services — Facebook, Messenger, Instagram, WhatsApp — went down due to an issue with its servers.

Shares of Facebook are off about 15.5% from recent highs, putting Zuckerberg’s empire in even worse shape than SaaS. This is despite a bullish advertising market.

All told, this is not the way that the stock market would have wanted to kick off its first full trading week of Q4. And because we’re expecting a few more IPOs before the end of 2021, it’s an ominous kickoff to the final public-offering push of the year.

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Tech shares set fresh records despite uncertain economy

Despite record-setting COVID-19 infections, American equities rose today. All major indices gained ground during regular trading, while tech stocks did even better.

The Nasdaq Composite set new 52-week and all-time highs, touching 10,462.0 points before closing at 10,433.65, up 2.21% on the day. Similarly, a basket of SaaS and cloud companies that has risen and fallen more sharply than even the tech-heavy Nasdaq closed this afternoon at 1,908.30 after touching 1,952.39 points. Both results were 52-week and all-time highs.

Such is the mood on Wall Street regarding the health of technology companies. It’s not hard to find bullish sentiment, jockeying to push tech shares higher. Some examples of today’s enthusiasm paint the picture:

  • The recent IPO Lemonade is now worth $4.7 billion, according to Yahoo Finance. That price gives it a Q1-annualized revenue run rate multiple of around 45x. For a SaaS company, that would boggle the mind. As we’ve written, however, Lemonade has very un-SaaS-like gross margins, and has higher churn. The company’s stock rose around 17% today for no clear reason.
  • Tesla rose over 13% today to $1,371.58 per share, another huge day of gains for the company now worth in excess of $250 billion. Analysts expect the firm to report $4.83 billion in revenue in its most recent quarter, according to Yahoo Finance. That’s less than the company reported in its year-ago June quarter when it saw $6.35 billion in revenue. Since July 1, 2019, Tesla shares have appreciated in excess of 450%, despite the company prepping to report what the market anticipates will be revenue declines.
  • Amazon and Netflix also set new records today to toss a few more names into the mix.

You can’t swing your arms without running into a reason why it makes sense for SaaS stocks to be trading at record valuation multiples, or why one company or another is actually reasonably valued over a long-enough time horizon.

It’s worth noting that this putatively rational public investor thinking doesn’t fit at all with what the tech set used to pound into my head about the public markets, namely that they are infamously impatient and thus utter bilge for most long-term value creation. Going public was garbage, I was told; you have to report every three months and no one looks out a few years.

Now, I’m being told by roughly the same people that the market is doing the very thing that they said it didn’t do, namely price firms for future results instead of trailing outcomes. Fine by me either way, frankly, but I’d like to know which story is true.

Happily, we’re about to see if all this high-fiving and enthusiasm is real.

Earnings season beckons, and it should bring with it a dose or two of clarity. If the digital transformation has managed to accelerate sufficiently that most tech companies have managed to greatly boost their near-term value, hats off to the cohort and bully for the startups that must also be enjoying similar revenue upswells.

But that doesn’t have to happen. There are possible earnings result sets that can cause investors to dump tech shares, as Slack learned a month ago.

The background to all of this is that there are good reasons to have some doubts about the current health of the national economy. And, sure, most people are willing to allow that the stock market and the aggregate domestic economy are not perfectly linked — this is no less than partially true — but each day the stock market steps higher and COVID-19 surges again leading to re-closings around the nation makes you to wonder if this is all for real.

Earnings season is here soon. Let’s find out.

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Tech’s biggest companies are worth ~$5T as 2019’s epic stock market run wraps

Look, this is the last post I’m writing in 2019 and I’m tired. But I can’t let the year close without taking stock of how well tech stocks did this year. It was bonkers.

So let’s mark the year’s conclusion with some notes for our future selves. Yes, we know that the Nasdaq has been setting new records and SaaS had a good year. But we need to dig in and get the numbers out so that we can look back and remember.

Let’s cap off this year the way it deserves to be remembered, as a kick-ass trip ’round the sun for your local, public technology company.

Keeping score

We’ll start with the indices that we care about:

  • The tech-heavy Nasdaq Composite rose 35% in 2019
  • The SaaS-heavy Bessemer Cloud Index rose 41% this year

Next, the highest-value U.S.-based technology companies:

  • Microsoft was up around 55% in 2019
  • Apple managed an 86% gain in the year
  • Not be left out, Facebook rose 57%
  • Amazon posted its own gain of 23% in 2019
  • Alphabet managed to grow by 29%, as well

Now let’s turn to some companies that we care about, even if they are smaller than the Big Five:

  • Salesforce? Up 19% this year
  • Adobe was up 46% in 2019, which was astounding
  • Intel picked up 28% in the year, making it no slouch
  • Even Oracle managed to gain 17% in 2019

And so on.

The technology industry’s epic run has been so strong that The Wall Street Journal noted this morning that, powered by tech companies, U.S. stocks “are poised for their best annual performance in six years.” The Journal highlighted the performance of Apple and Microsoft in particular for helping drive the boom. I wonder why.

How long will we live in the neighborhood of Nasdaq 9,000? How long can two tech companies be worth more than $1 trillion at the same time? How long can the biggest tech companies be worth a combined $4.93 trillion (I remember when $3 trillion for the Big Five was news, and I recall when the group reach a collective value of $4 trillion).1

But the worst trade in recent years has been the pessimists’ gambit. No matter what, stocks have kept going up, short-term hiccoughs and other missteps aside.

For nearly everyone, that is. While tech stocks in general did very well, some names that we all know did not. Let’s close on those reminders that a rising tide lifts only most boats.

2019 naughty list

Several of the most lackluster public tech companies were 2019 technology IPOs, interestingly enough. Who didn’t do well? Uber earns a spot on the naughty list for not only being underwater from its IPO price, but also from its final private valuations. And as you guessed, Lyft is down from its IPO price as well, which is not good.

Some 2019 IPOs did well in the middle of the year, but fell a little flat as the year came to a close. Pinterest, Beyond Meat and Zoom meet that criteria, for example. And some SaaS companies struggled, even if we think they will reach $1 billion in revenue in time.

But it was mostly a party. The public markets were good, and tech stocks were great. This helped create another 100+ unicorns in the year.

Such was 2019. On to 2020!

  1. In time, those numbers will look small. But sitting here on December 31, 2019, they appear huge and towering and, it must be said, somewhat perilously stacked.
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As the Nasdaq sets new records, a reminder how highly valued tech stocks are today

Today the tech-heavy Nasdaq Composite closed at an all-time record high of 8,814.23, up 0.91% on the day.

The Nasdaq is up more than 32% on the year. Turning the clock back, the Nasdaq Composite is up around 60% from the end of 2016. Compared to the anti-records set in 2009 during the doldrums that followed the 2008 crisis, the Nasdaq is up a staggering 594%.

The huge run in value of technology stocks since the last recession is historic. And, given the length of the current global economic expansion, somewhat lost on regular folks.

Times are good, and it’s worth reminding ourselves of how good. After all, the private markets — the world of startups, venture capital and the next big companies — follow the public markets’ lead. If we understand what’s going on with tech stocks, we’ll better understand what is happening with your local startup cohort.

Or more precisely, if you’ve been confused about why every startup is worth a bajillion (plus or minus) dollars, this is why.

How many unicorns will exit before the market turns?

A record run

Putting today’s Nasdaq level into historical context is a bit difficult. It has been so long since the last, lasting correction in the value of technology companies that their aggregate share price chart is simply up and to the right. Can you recall the last time tech stocks dropped real value, and stayed down?

Probably not. The reason why is that compared to the post-2008 expansion, the 2000-era technology bubble appears small, pathetic and short-lived. Via YCharts, here’s a look at the Nasdaq Composite going back into the ’80s:

That, in a nutshell is why there are so many unicorns in the market; that chart is why SaaS multiples are still around 10-11x ARR (per Bessemer, which is rebuilding its cloud index page at the moment). That chart is a part of why Uber’s valuation got ahead of its real value. It’s also why venture capital funds have gotten larger, private equity deals more expensive and SoftBank may raise a second Vision Fund despite a host of high-profile wobbles. It’s how Microsoft added mow than 50% of its total value this year.

You get the idea.

The stock market is incredibly strong right now, a fact that is pushing lots of private investors to pay more for growth in anticipation that companies’ revenue multiples will stay high (as dictated by public comps, or what larger companies are willing to pay for startups). So long as the Nasdaq keeps going up, that bet makes the punters look smart.

So what?

We could have written this post a few times in the past week, let alone this year.  Of course, we can’t post a similar entry every time a tech-focused index hits a new record high — you’d fine it repetitive. But we also can’t not mention it every time, as it is critical to recall that today’s warm climate for startups is predicated on a public market trend that will not — cannot — last.

When will things change? No one knows. So far this December there’s no mini-crash to worry about. Things just look good, and healthy, and flush with new records.

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China’s new Nasdaq-style board for tech shares starts trading with 25 companies listed

Trading on China’s new Nasdaq-style stock market began today, with 25 tech companies listed on the Science and Technology Innovation Board, operated by the Shanghai Stock Market. Called the STAR Market, the board is an initiative by the government to encourage more Chinese tech companies to list domestically by addressing concerns about governance.

Traders cautioned that initial trading may be volatile as investors buy and trade stocks, however, and that warning was borne out today with trading by several companies paused after a surge of buying triggered their circuit breakers, or measures put into place that temporarily halt buying and selling to prevent stock crashes.

Plans for the STAR Market were announced in November as part of the Chinese government’s efforts to launch capital market reforms and make listing in mainland China more appealing to tech companies by easing profitability requirements. Some of the highest-profile Chinese tech IPOs, including Alibaba, Tencent, Xiaomi, JD.com and Pinduoduo, have taken place in New York City or Hong Kong, and the STAR Market may encourage more local stock debuts and investment—a goal that holds especially high stakes as China’s trade war with the U.S. continues.

But CNBC notes that the success of the STAR Market is far from a sure thing, since China has launched two other equity markets (the ChiNext in 009 and the New Third Board in 2013) that still receive far less attention than its two primary stock exchanges in Shanghai and Shenzhen.

Posted on

China’s new Nasdaq-style board for tech shares starts trading with 25 companies listed

Trading on China’s new Nasdaq-style stock market began today, with 25 tech companies listed on the Science and Technology Innovation Board, operated by the Shanghai Stock Market. Called the STAR Market, the board is an initiative by the government to encourage more Chinese tech companies to list domestically by addressing concerns about governance.

Traders cautioned that initial trading may be volatile as investors buy and trade stocks, however, and that warning was borne out today with trading by several companies paused after a surge of buying triggered their circuit breakers, or measures put into place that temporarily halt buying and selling to prevent stock crashes.

Plans for the STAR Market were announced in November as part of the Chinese government’s efforts to launch capital market reforms and make listing in mainland China more appealing to tech companies by easing profitability requirements. Some of the highest-profile Chinese tech IPOs, including Alibaba, Tencent, Xiaomi, JD.com and Pinduoduo, have taken place in New York City or Hong Kong, and the STAR Market may encourage more local stock debuts and investment—a goal that holds especially high stakes as China’s trade war with the U.S. continues.

But CNBC notes that the success of the STAR Market is far from a sure thing, since China has launched two other equity markets (the ChiNext in 009 and the New Third Board in 2013) that still receive far less attention than its two primary stock exchanges in Shanghai and Shenzhen.