A Few Thoughts On Tech Stocks
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Shares in technology companies have recently come under intense pressure, similar to other equities, markets, commodities and more. How far tech shops have declined, however, is worth digging into. After all, if the value of public tech companies has declined sharply, it could impact the value of private startups like Uber or Dropbox.
I picked a few dozen public tech companies that you’ve heard of and placed them into three groups: Recent IPOs, Adolescents, and Where Your Parents Worked. Each category is sorted by percent decline in share value for a company, compared to its 52-week high.
All data is via Google Finance, and WolframAlpha was kind enough to divide for us all. Here’s the raw list:
Recent IPOs
Percent decline from 52-week high at end of regular trading:
- New Relic: 15.74 percent
- Arista Networks: 24.03 percent
- Shopify: 36.08 percent
- Alibaba: 42.88 percent
- Box: 45.57 percent
- GoPro: 52.24 percent
- Hubspot: 53.17 percent
- Etsy: 63.99 percent
- Castlight Health: 65.17 percent
- MobileIron: 70.06 percent
Adolescents
Percent decline from 52-week high at end of regular trading:
- Netflix: 21.48 percent
- LinkedIn: 38.47 percent
- Pandora: 40.1 percent
- Groupon: 52.43 percent
- Twitter: 56.28 percent
- Yelp: 73.84 percent
Where Your Parents Worked
Percent decline from 52-week high at end of regular trading:
- Google: 14.23 percent
- Microsoft: 19.12 percent
- Amazon: 19.67 percent
- Apple: 22.89 percent
- IBM: 27.66 percent
- Yahoo: 39.68 percent
What It Means
Before we get too deep, keep in mind that companies nearly always trade at a discount to their 52-week highs. That’s simply because, unless the firm in question just set a new high, it’s below its prior local maximum. That’s tautological, but useful.
Now, to a few thoughts:
- Share performance of recent IPOs from their highs has been nasty. That doesn’t mean that the IPO market is borked (Hubspot, for example, is down sharply from its 52-week high, but is still up from its IPO price), but it does underscore that investor sentiment concerning these younger firms has slipped.
- That means that the animal spirits involved with bolstering the value of recent IPOs is likely at a bit of a low point. That could lead to delays in new offerings, for example.
- Among the adolescents, the scale of declines from the cadre’s 52-week highs surprised me. I knew that Twitter and Yelp and Groupon were having a rough go of it, but I didn’t expect the delta to be as large as it was. That could imply souring investor attitudes to tech companies a bit further on in age, and time they’ve been public. (Presumably, investors are discounting future earnings and growth, implying that these firms will not meet prior expectations.)
- Potentially lower sentiment from investors about the adolescents could handicap coming gains in value among the recent IPOs, as the class of company that is next in line for them isn’t performing very well.
- Holy shit, Yelp.
- The biggest companies on our list performed best, which makes sense, as they have the most cash, stable earnings and the like. But even our whales have some drop to them. Instead of saying here that the declines insinuate a fall in optimism with investors, larger tech firms are falling more in line with the market, making their declines less interesting for us here.
However, things don’t look great. Let’s see what China does in a few hours.
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