Where Tech Stock Valuations Stand Following a Massive Selloff

Multiples for well-known tech stocks have meaningfully compressed across the board.
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With the Nasdaq down nearly 15% from last week’s highs, valuations for many tech companies now look pretty reasonable, even if one applies a discount for coronavirus-related uncertainty.

At the same time, multiples for some recent high-flyers are still elevated, even if they aren’t quite as high as they were when the Nasdaq was above 9,800.

Here’s a look at where valuations now stand for some well-known tech companies, based on FactSet consensus estimates. Three things to keep in mind:

  1. Though valuations still matter, it’s understandable that companies that look poised to deliver healthy double-digit growth in the coming years will sport meaningfully higher multiples than slower-growing peers.
  2. While forward EPS multiples are often used, forward free cash flow (FCF) multiples are used for companies with large subscription software businesses (given that their annual FCF is often much higher than their reported earnings), and forward sales and billings multiples are used for growth-stage tech companies whose profits are for now depressed due to aggressive spending.
  3. For companies that have shown a knack for guiding conservatively and subsequently topping estimates, there’s a decent chance that (barring a major macro or company-specific shock) analyst estimates will prove too low.

Alphabet  (GOOGL) - Get Report

Decline from 52-Week High: 15%

Valuation: Alphabet trades for 21 times a 2021 GAAP EPS consensus of $62.35.

Amazon  (AMZN) - Get Report

Decline from 52-Week High: 16%

Valuation: Amazon has an enterprise value (market cap minus net cash) equal to 2.4 times a 2021 revenue consensus $391.3 billion. The 2021 GAAP EPS consensus (depressed some by heavy spending) stands at $40.08.

AMD  (AMD) - Get Report

Decline from 52-Week High: 26%

Valuation: AMD trades for 28 times a 2021 non-GAAP EPS consensus of $1.59.

Applied Materials  (AMAT) - Get Report

Decline from 52-Week High: 19%

Valuation: Applied trades for 12 times a fiscal 2021 (ends in Oct. 2021) non-GAAP EPS consensus of $4.70.

Apple  (AAPL) - Get Report

Decline from 52-Week High: 16%

Valuation: Apple trades for 18 times a fiscal 2021 (ends in Sep. 2021) GAAP EPS consensus of $15.61.

Cisco Systems  (CSCO) - Get Report

Decline from 52-Week High: 33%

Valuation: Cisco trades for 12 times a fiscal 2021 (ends in July 2021) EPS consensus of $3.39.

Facebook  (FB) - Get Report

Decline from 52-Week High: 16%

Valuation: Facebook trades for 17 times a 2021 GAAP EPS consensus of $10.95.

Intel  (INTC) - Get Report

Decline from 52-Week High: 22%

Valuation: Intel trades for 11 times a 2021 non-GAAP EPS consensus of $4.99.

Microsoft  (MSFT) - Get Report

Decline from 52-Week High: 17%

Valuation: Microsoft has an enterprise value equal to 24 times a fiscal 2021 (ends in June 2021) FCF consensus of $47.5 billion.

Nvidia  (NVDA) - Get Report

Decline from 52-Week High: 18%

Valuation: Nvidia trades for 28 times a fiscal 2022 (ends in Jan. 2022) non-GAAP EPS consensus of $9.36.

PayPal  (PYPL) - Get Report

Decline from 52-Week High: 16%

Valuation: PayPal trades for 25 times a 2021 non-GAAP EPS consensus of $4.18.

Qualcomm  (QCOM) - Get Report

Decline from 52-Week High: 20%

Valuation: Qualcomm trades for 12 times a fiscal 2021 (ends in Sep. 2021) EPS consensus of $6.16.

Salesforce.com  (CRM) - Get Report

Decline from 52-Week High: 15%

Valuation: Salesforce has an enterprise value equal to 5.7 times a fiscal 2022 (ends in Jan. 2022) billings consensus of $27.2 billion, and 29 times a fiscal 2022 FCF consensus of $5.3 billion.

SAP  (SAP) - Get Report

Decline from 52-Week High: 14%

Valuation: SAP has an enterprise value equal to 24 times its 2021 FCF consensus of $6.44 billion.

Taiwan Semiconductor  (TSM) - Get Report

Decline from 52-Week High: 13%

Valuation: TSMC trades for 20 times a 2021 EPS consensus of $2.70.