The recent decline in tech stocks has led to a broad narrative: The market’s appetite for young tech stocks in late 2013 and early 2014 led to valuation excesses, and the ensuing declines have all but closed the IPO window. Today, in a nice bucking of that trend, beleaguered companies that posted large declines are picking up big gains.
Twitter, probably the most famous of the so-called “momentum” technology stocks, is up more than 5 percent. FireEye, which has shed most of its value, is up 9.3 percent. Palo Alto Networks is up 6.5 percent, Netflix is up around 4 percent. Facebook and Tesla are up smaller percentages, as well.
The broader market is up, technology as a segment up a little more, but it’s the younger tech companies that are pushing ahead today. Not a bad start for the week.
The bounce is almost ironic, given the negative press that many of the surging companies picked up over the weekend. The Wall Street Journal wrote a much-shared article entitled “Tech Stocks Are Still ‘Too Silly’ for some.” The article’s main thrust is that when you compare current valuations to next year’s earnings, technology companies like Twitter are quite overvalued.
The Journal cited Mitch Rubin of RiverPark Funds saying that, with the declines, “we’ve gone from three times silly to two times silly.” Make it 2.1 times silly after today’s gains.