Last year, in 2021, it seemed like a good deal to buy some great tech stocks…
The previous year, in 2021, it was possible to purchase some excellent technology stocks for prices that appeared to be bargains…
Spotify costing $305
At $404, Zoom Video Communications
Roku Inc at $490
$700 for Netflix
At the period, there was a lot of happiness on the market. Stocks were going up, especially tech stocks. The market for high-growth, future-looking tech stocks seemed to go up and up and up.
Tech stocks not only fell, but they were also wiped out.
Today, all of those stocks can be bought at rock-bottom prices of…
Spotify at $115 – a 62 percent fall
Zoom Video Communications is now $110, which is a 72% drop
Roku Inc. at $95 – a drop of 80%
Netflix at $223 – a 68 percent fall
This is just a small sample of a whole sector where prices have dropped anywhere from 50% to 90%. (and then some).
It was and still is a hard market to work in.
From the high ground of 2021, things have been rough, but it’s not as bad as it might seem.
To begin, what exactly do we mean when we talk about “technology stock”?
These days, doesn’t “tech” become used by every company?
Most of the time, yes, they do.
But in terms of the stock market, “tech stocks” refers to any stock in the technology sector, from companies that make software to companies that make semiconductors and even companies that make cryptocurrency.
As was already said, tech stocks have gone down a lot in the last year.
From its high on November 18, 2021, the Nasdaq 100 index, which is made up of the biggest and most actively traded tech companies, has dropped by 39.5%.
The last time the Nasdaq fell this much was in 2008, during the height of the global financial crisis (GFC).
There are also a lot of signs that things may go down even more. As the world’s economies get tighter, we still don’t know how much money many tech companies made last year. If earnings aren’t as good as expected and global growth slows, many tech stocks may have to face the facts.
Take Roku as an example. Its price-to-earnings (PE) ratio is still around 94.
Very high PE ratios can be a sign that a stock’s price is too high compared to its earnings. It can also mean that the market prices in strong growth in the future…
But when the market is falling apart, high PE ratios can be a sign that more pain is on the way as valuations move closer to what the company actually makes.
Will stocks in tech ever get better?
“Recover” means different things to different people.
In early 2000, the Nasdaq 100 index reached its highest point ever. Then the bubble in what are sometimes called “dotcom stocks” or “technology, media, and telecommunications” (TMT) stocks burst. The bottom of the market didn’t come until late 2002, which was more than two years later.
The market then grew by more than twice as much over the next five years. From the bottom, that looks like a comeback. But the overall index didn’t go above the all-time highs until the middle of 2016!
Yes, the market has fully recovered about 16 years after the TMT/dotcom peaks.
So the word “recovery” is always tricky. If you look at an overall index, it can take a long time for things to get better. But there are also many opportunities to make money during a recovery.
The most important thing to know is that there are ways to make money with smart investments in any market, whether it’s going up or down.
Also, no matter how high or low the markets go, or how many crashes or crises they go through, the markets always recover in the long run.
When you have a long-term investment plan, markets not only recover, but they also pay off in the long run.
Even though it might take many companies a few years to get back on their feet, we expect the market to recover and then reach new all-time highs.
But it should be said that some businesses won’t make it at all. There will be business that don’t make it. There will be stocks that lose all of the money investors put into them. But, all things considered, we still think that investing in tech stocks over the long term is one of the most exciting ways to invest in the market.
