Which tech stocks are suffering and – crucially – why? With the stock markets on a slide since the start of the year, the usual game of over-hyping companies that are doing well has flipped and now the game is to give companies – particularly tech stocks – a good kicking on the way down. Much of the current frenzy appears built around Twitter, which is having a bad year, and the …
"...at least they make something..."
Came here to say something quite similar.
Albeit that all tech stocks seem to be suffering at the moment, I too was surprised to see that companies who actually make 'stuff' like Western Digital & Fitbit [hardware], and Atlassian [software] are tanking even more than companies like Twitter and Facebook, whose only contribution to the planet seems to be selling advertising space on peoples' boredom.
And Atlassian, according to the article, is profitable.
I think they'll weather the storm. They have a decent portfolio of products1 and they make money. They may find it harder to borrow for a while, but they should be able to tread water and continue with business as usual for a few quarters until the real weaklings are killed off.
1I'm no great fan of their stuff, either; I'm a command-line guy. When I want git, I run the git executable. But I work with people who use Atlassian Stash, so I have to poke at it occasionally, and it's far from the worst web-based tool I've ever used.
Zynga always looked like a shonky investment to me. They need to keep people signing up to the next pay to win blockbuster game, and as their users become immune to the general pointlessness of the next new title, they need another and another.
I imagine they'll bumble along as a shadow of their former self, sort of Yahoo! for mobile phones.
Greed takes over yet again. Self agreement and benchmarking valuations on user numbers of other loss making services. Like building on someone else's sand.
Having lots of users for free apps and services != value when everyone has that.
Atlassian will ride the storm though, they are selling stuff that people value.
Au contraire: all of the companies are post-IPO so the VCs have already trousered enormous profits, even on Square which didn't quite make its 4 bn valuation on IPO.
As long as these companies can stop themselves from becoming penny stocks then they should be okay. The companies who really need to worry are those who are looking for more funding or were planning to IPO any time soon.
But the VCs have learned from 2000 and very few of them will feel any pain. If <insert-dorky-name-of-dodgy-service-here/> doesn't look like it's going to make much on IPO then it will either be sold to a) the competition; b) a tech behemoth still looking for a digital strategy like Microsoft, for example c) a clueless pension fund (and, trust me, there are enough of those around). The only ones who need to worry are employees who took stock options instead of pay. The VCs will be laughing all the way to their Porsche dealers!
Are the good times over, then?
Yup. While most market analysts are predicting things to end up very bad for a protracted period [1], my own worthless reading of the tea leaves is that we'll enter recession in 2017, and exit late that year or Q1 2018 [2].
America is growing enough to raise interest rates, oil is so cheap as to be virtually free, as are most construction commodities. There are still largely cheap pools of labour in the world. Someone will find a way to combine that and add value, which gives us growth.
Add to that the wall of cash many companies are sitting on, and there's not the gearing there was last time around.
[1]- From some of the forecasts I've seen at work you'd think the Four Horsemen of the Apocalypse were saddled up and just finishing their pre-ride piss.
[2]- Technical definition requires two quarters of back to back below zero 'growth' to start the recession, meaning by the time you're officially in one, you've been in it for 6 months already.
While most market analysts are predicting things to end up very bad for a protracted period [1], my own worthless reading of the tea leaves is that we'll enter recession in 2017, and exit late that year or Q1 2018 [2].
I'm not going to try to predict a recession (I won't be surprised either way), but I agree that many of the stories, at least in the popular press, about the stock market are wildly exaggerated.
At this point I'm not personally worried at all. I'm far enough from retirement that this is likely to be good for my 401(k) - the funds will be able to buy low, and some firms with cash will return some of it to investors to meet cost-of-capital and prop up their share prices. I'm perfectly happy to take a temporary hit in notional value while that goes on for a year or two.
And I think much of the tech sector will chug along in line with the broader market. Here at Micro Focus we're down in line with the market for 2016, which puts us just about where we were 6 months ago. Over one or three years we're up significantly.
Facebook has a huge advantage; like tobacco, it seems that using it causes brain changes that drive further use. In this case, it's an increase in narcissism coupled with slight depression caused by constantly reading about other people who seem to be having much more exciting lives than you are, leading to people spending time on Facebook inflating their cvs to feel better about themselves.
Twitter by contrast burns people when they do something in a hurry which causes a negative reaction from other users. It punishes stupidity.
I think the main threat to Facebook is from governments; if only it wasn't so useful to the security services it might have been more heavily restricted long ago.
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