Remember the great tech rout from earlier this year? Tech stocks plummeted as equity bears growled that the successful IPOs of Facebook, LinkedIn and Twitter were making a mockery of the boring business of fundamental analysis.
Flash forward just a few months, and we find that tech stocks (especially in the US) have in fact started to recover some of their verve, but what is clear is that ‘old-fashioned’ ideas of valuation based around, say, earnings are so ‘analogue’ – bar the odd exception such as Microsoft. The latter’s forward P/E ratio may look reasonable at 13 times earnings, while Google may even at a stretch be decent value at 18 times, but how on earth can anyone think that Twitter at 256 times projected earnings makes sense – ditto for Facebook at 36x and LinkedIn at 57x? Many industry commentators...
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