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Aswath Damodaran doesn't think so: http://aswathdamodaran.blogspot.com/2015/03/illiquidity-and-bubbles-in-private.html http://aswathdamodaran.blogspot.com/2015/

Aswath Damodaran doesn't think so: http://aswathdamodaran.blogspot.com/2015/03/illiquidity-and-bubbles-in-private.html http://aswathdamodaran.blogspot.com/2015/03/illiquidity-and-... Unlike the 1990s, the market capitalization of technology companies in 2014 is backed up by operating numbers that are commensurate with value. Unlike the 1990s, when tech companies climbed from single digits in 1990 to almost 30% of the overall market capitalization by the end of 1999, tech stocks collectively have stayed at about 20% of the overall market.

vonmoltke 11y ago
While I think the bubble talk is ridiculous clickbait at this point, I would caution on using this logic as a reason why there isn't a bubble. Sarbanes-Oxley had a major impact on the way tech companies get funded such that I'm not sure how much signal is contained in tech company stocks today vice 1999 when the IPO was the standard "exit".
adventured 11y ago
The excesses today are more like 2005-2007, right before the great recession, than they are akin to 1999-2000. There are significant isolated pockets of extreme overvaluation in tech. It's nothing like the broad, mainstream 1999 bubble however. For example, recently Facebook's PE ratio was around 85. That's comparable to how extreme Microsoft and Cisco were valued during the height of the dotcom bubble. Netflix has a ~150 PE being generous on their net income potential. That's a $40 billion market cap, that should be a lot closer to $15 billion based on their actual sales growth (which is not that impressive) and net income growth potential. Twitter is extraordinarily overvalued. Likely by 200%. LinkedIn has never demonstrated the capacity to generate good net income. Until they started losing money again, they were carrying an N hundred PE ratio. Their growth has slowed considerably, and will continue to. They're worth maybe 1/3 where they're trading at today, when the music stops. The enterprise SaS sector is hyper overvalued. Workday, Splunk, Palo Alto Networks, Salesforce, FireEye, etc. are all sporting dotcom bubble style valuations. Yes they have sales, and not one of them comes even remotely close to justifying their valuations based on either growth or sales (profits are out, because none of them have any). What's going to happen when this party ends - as all parties must - is valuations will get chopped drastically, at least in half for the average high-valuation tech company.

vonmoltke 11y ago

While I think the bubble talk is ridiculous clickbait at this point, I would caution on using this logic as a reason why there isn't a bubble. Sarbanes-Oxley had a major impact on the way tech companies get funded such that I'm not sure how much signal is contained in tech company stocks today vice 1999 when the IPO was the standard "exit".

adventured 11y ago

The excesses today are more like 2005-2007, right before the great recession, than they are akin to 1999-2000. There are significant isolated pockets of extreme overvaluation in tech. It's nothing like the broad, mainstream 1999 bubble however. For example, recently Facebook's PE ratio was around 85. That's comparable to how extreme Microsoft and Cisco were valued during the height of the dotcom bubble. Netflix has a ~150 PE being generous on their net income potential. That's a $40 billion market cap, that should be a lot closer to $15 billion based on their actual sales growth (which is not that impressive) and net income growth potential. Twitter is extraordinarily overvalued. Likely by 200%. LinkedIn has never demonstrated the capacity to generate good net income. Until they started losing money again, they were carrying an N hundred PE ratio. Their growth has slowed considerably, and will continue to. They're worth maybe 1/3 where they're trading at today, when the music stops. The enterprise SaS sector is hyper overvalued. Workday, Splunk, Palo Alto Networks, Salesforce, FireEye, etc. are all sporting dotcom bubble style valuations. Yes they have sales, and not one of them comes even remotely close to justifying their valuations based on either growth or sales (profits are out, because none of them have any). What's going to happen when this party ends - as all parties must - is valuations will get chopped drastically, at least in half for the average high-valuation tech company.