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Why Wall Street Is Battering Tech's Biggest Names

17 points by iProject 14y ago

angdis 14y ago
I agree with the first comment: "...so in other words the companies themselves are fine and a bunch of asshole investors are playing with the market."
- TDL 14y ago
  That comment is utter nonsense and shows ignorance of stock markets. "Asshole investors" aren't playing with the market, investors are reacting to information that doesn't confirm their expectations, so they sell. Furthermore, stock prices fluctuate for a variety of reasons and it's ridiculous to ascribe malice to these price movements.
  - angdis 14y ago
    One doesn't need "malice" to be an asshole. I am just sick of the stock price driving too much of what happens in large companies. Obviously, stock-price fluctuations aren't rational nor do they have a particularly strong relationship with reality but they do impact the well-being of hard-working people who might get canned just because wall-street has whimsically "decided" to toggle their company's stocks for fun and profit.
    - TDL 14y ago
      Employees are not fired because of a plummeting stock prices. Falling prices are typically the by-product of the underlying business.
TDL 14y ago
1.Why is Wired writing about stock prices? Most of the financial media can barely understand why prices fluctuate, why does Wired think they have a better insight? 2.The stock market (particularly growth oriented firms) are about expectations. If investors are betting that an outcome is going to occur and they are wrong they will sell, it's that simple. 3.Stock price != the company. Don't confuse the two.
- deleted 14y ago
  [deleted]
- hnriot 14y ago
  I should imagine that Wired can write about whatever their editors choose, they are writing about tech companies and have done so in the past so I don't see why this should be of any surprise. Wired might very well have better insight than the financial media at large because they have intimate knowledge of the workings of the tech industry, and since the "financial media" completely failed to notice the impeding doom that was (is) the housing crisis, it's not like the established financial sources are any better at this stuff. As for #2, this shows you have no clue about how the stock market works. Life in the financial world is far far more complex than you imply.
  - TDL 14y ago
    Since I was a trader for five years and help build an equity research firm, I think I have enough domain knowledge to stand by the assertion I made in my second point. Wired may have a much better understanding of the technology and the industries that these companies operate in, but I was discussing the fluctuations of the stock price not the relevant business lines. I will now re-iterate what I said earlier; stock price != the company. Don't confuse the two.
ajiang 14y ago
It's important to understand that as an asset class, public equity has a certain tolerance for unpredictability and risk (lower tolerance compared to venture or growth capital). Very predictable, mature industries like utilities, industrials, and certain financial institutions offer relatively stable cashflow through thoroughly understood revenue streams -- and thus they benefit from a generally lower level of volatility. Technology firms on the other hand (Facebook being a great example) have great elements of unpredictability, along with high potential for growth, two conflicting forces that factor into stock price. Take, for example, Amazon. In its recent earnings announcement, Amazon posted a loss on net income of $274 million. If Amazon replicated this result in perpetuity, it would soon be a bankrupt company. Amazon's EPS is 0.07 cents per share, giving it a price to earnings ratio of over 3,000. If you purchased Amazon at its current price and if Amazon replicated this result in perpetuity, it would take 3,000 years before you were paid back on your stock. Now of course that's a silly analysis when you don't take into consideration growth and expected future cash flow. Clearly investors factor in a tremendous amount of growth in many large technology companies. However, investors are not prescient. They need indicators on the likelihood of this future growth, so factors like ad sales, product sales, new product growth, etc are extremely important. Any major shifts either above or below their expectations changes their growth estimates. Since a significant portion of their purchase price is going into future growth, any changes to growth estimates will have a magnified impact on valuation (i.e. price they're willing to pay). Is there some speculation going on? Probably. But the mere act of investing in the public equity of certain technology companies is a form of speculation. And there's far more to how markets are made than can be distilled in a short article, especially if we try to generalize the forces at play.
niggler 14y ago
To be fair, a few months ago Wall Street was pricing in a series of miracles. We are at a lower point in the tech hype curve. Note: YTD AAPL is still up nearly 50%

17 points by iProject 14y ago

I agree with the first comment: "...so in other words the companies themselves are fine and a bunch of asshole investors are playing with the market."

TDL 14y ago
That comment is utter nonsense and shows ignorance of stock markets. "Asshole investors" aren't playing with the market, investors are reacting to information that doesn't confirm their expectations, so they sell. Furthermore, stock prices fluctuate for a variety of reasons and it's ridiculous to ascribe malice to these price movements.
- angdis 14y ago
  One doesn't need "malice" to be an asshole. I am just sick of the stock price driving too much of what happens in large companies. Obviously, stock-price fluctuations aren't rational nor do they have a particularly strong relationship with reality but they do impact the well-being of hard-working people who might get canned just because wall-street has whimsically "decided" to toggle their company's stocks for fun and profit.
  - TDL 14y ago
    Employees are not fired because of a plummeting stock prices. Falling prices are typically the by-product of the underlying business.

TDL 14y ago

1.Why is Wired writing about stock prices? Most of the financial media can barely understand why prices fluctuate, why does Wired think they have a better insight? 2.The stock market (particularly growth oriented firms) are about expectations. If investors are betting that an outcome is going to occur and they are wrong they will sell, it's that simple. 3.Stock price != the company. Don't confuse the two.

deleted 14y ago
[deleted]
hnriot 14y ago
I should imagine that Wired can write about whatever their editors choose, they are writing about tech companies and have done so in the past so I don't see why this should be of any surprise. Wired might very well have better insight than the financial media at large because they have intimate knowledge of the workings of the tech industry, and since the "financial media" completely failed to notice the impeding doom that was (is) the housing crisis, it's not like the established financial sources are any better at this stuff. As for #2, this shows you have no clue about how the stock market works. Life in the financial world is far far more complex than you imply.
- TDL 14y ago
  Since I was a trader for five years and help build an equity research firm, I think I have enough domain knowledge to stand by the assertion I made in my second point. Wired may have a much better understanding of the technology and the industries that these companies operate in, but I was discussing the fluctuations of the stock price not the relevant business lines. I will now re-iterate what I said earlier; stock price != the company. Don't confuse the two.

ajiang 14y ago

It's important to understand that as an asset class, public equity has a certain tolerance for unpredictability and risk (lower tolerance compared to venture or growth capital). Very predictable, mature industries like utilities, industrials, and certain financial institutions offer relatively stable cashflow through thoroughly understood revenue streams -- and thus they benefit from a generally lower level of volatility. Technology firms on the other hand (Facebook being a great example) have great elements of unpredictability, along with high potential for growth, two conflicting forces that factor into stock price. Take, for example, Amazon. In its recent earnings announcement, Amazon posted a loss on net income of $274 million. If Amazon replicated this result in perpetuity, it would soon be a bankrupt company. Amazon's EPS is 0.07 cents per share, giving it a price to earnings ratio of over 3,000. If you purchased Amazon at its current price and if Amazon replicated this result in perpetuity, it would take 3,000 years before you were paid back on your stock. Now of course that's a silly analysis when you don't take into consideration growth and expected future cash flow. Clearly investors factor in a tremendous amount of growth in many large technology companies. However, investors are not prescient. They need indicators on the likelihood of this future growth, so factors like ad sales, product sales, new product growth, etc are extremely important. Any major shifts either above or below their expectations changes their growth estimates. Since a significant portion of their purchase price is going into future growth, any changes to growth estimates will have a magnified impact on valuation (i.e. price they're willing to pay). Is there some speculation going on? Probably. But the mere act of investing in the public equity of certain technology companies is a form of speculation. And there's far more to how markets are made than can be distilled in a short article, especially if we try to generalize the forces at play.

niggler 14y ago

To be fair, a few months ago Wall Street was pricing in a series of miracles. We are at a lower point in the tech hype curve. Note: YTD AAPL is still up nearly 50%