Given the state of the markets, Tiernan Ray, a veteran journalist who has followed technology stocks for decades, tries to answer this most pertinent of questions. While reading the piece, you might encounter jaw-dropping statements like Apple stock is still undervalued despite being a trillion-dollar company.
Stock analysts started to value tech stocks by simply comparing them to other stocks. Almost everything became relative value. Now, once stocks become unhinged from the earnings power of assets, and become merely a comparison of relative valuations of assets, one has valuations that are all over the map.
Everything is worth not what the business generates, but rather whatever someone wants it to be priced at relative to whatever is similar that has recently been priced at whatever multiple.
Where once tech companies reported merely revenue, earnings, and maybe an adjusted figure for earnings, backing out stock compensation expense, every single company now has a strange brew of reported figures.
I don’t want to quote the whole damn piece. It is so good, and it is worth reading. Please do yourself a favor, and do it right now!