3/27/2012 11:30 PM ET|
Old-tech titans flying high again
It's been a dozen years, one dot-com implosion and a Great Recession since the Nasdaq last saw these heights. Investors wonder how long the good times can last.
The technology-focused Nasdaq ($COMPX) index recently topped 3,100, a milestone last accomplished during the tech bubble in 2000. As a result, some of the tech sector's biggest names -- including innovative icons like Apple (AAPL) as well as dot-com club members that have, to many investors, since become stodgy corporations -- are flying high.
So is this another tech bubble? Which stocks will crash hard and which ones will continue to rise?
The sector's breakneck run-up since Thanksgiving undoubtedly has created some froth in the market. The Nasdaq is up 18% over the past three months, with some big tech stocks, including Apple, doing even better than that. There is reason to think that, for some of these investments, the profits are going to stick.
Here are seven tech stocks trading above or near their 2000 valuations, and a forecast on whether the stocks are likely to sustain their recent gains. (Note: March 21, 2000, stock prices are adjusted for splits and dividends.)
March 21, 2000: $72.38
March 21, 2012: $191.73
Don't be fooled by the fact that shares of Amazon.com (AMZN) have more than doubled since the dot-com days. It has flopped in the short term; it's off nearly 20% from its 52-week high.
True, Amazon has been a perennial outperformer, but it is getting squeezed and could be in trouble. Amazon's net profit is normally about 5% of revenue, thanks to rock-bottom pricing. And the Seattle company is investing a huge amount of capital in its Kindle Fire tablet computer. In fact, the company will pretty much break even in its next earnings report because a tremendous amount of profit is being siphoned off for research and subsidies for the Kindle.
So while Amazon might be above its dot-com valuation, there are hints that its upward momentum is waning.
March 21, 2000: $33.74
March 21, 2012: $602.50
Even after a 17-fold increase in the stock's value, it's obvious to most that Apple has room to run. A few reasons why:
- Apple has announced a new dividend of $2.65 per quarter, for a dividend yield of about 1.8%.
- The dividend is coupled with a $10 billion share buyback plan.
- The latest iPad and a price cut for the iPad 2 will tighten Apple's grip on the tablet market.
- The Cupertino, Calif., company's first-quarter earnings rose 118%.
- Based on a fiscal 2013 earnings forecast of $49 a share, Apple is reasonably priced, with a forward price-to-earnings ratio of 12.1.
March 21, 2000: $26.81
March 21, 2012: $37.42
A roughly 40% gain since the dot-com days is no small feat for eBay (EBAY), though it is worth noting that the stock remains significantly off its 2004 peak of almost $60, adjusted for splits.
So is the stock on the way up or down? Earlier gains were fueled by the steps the San Jose, Calif., company took to diversify beyond online auctions and into online payments, via its shrewd acquisition of PayPal. Today, PayPal represents eBay's best growth catalyst. PayPal technology is at the forefront of mobile-payment functionality, giving account holders the option, for instance, of using a cellphone to pay for drinks at the bar.
What's more, the company is riding 10 consecutive quarters of revenue gains. All that suggests eBay has more pop left.
March 21, 2000: $487.51
March 21, 2012: $703.65
Priceline.com (PCLN) stock was pricey 12 years ago, at nearly $500 a share, but it still has managed to trend higher. This despite a down economy that has sapped tourism spending -- and the fact that the Norwalk, Conn., company recently gave iconic pitchman William Shatner the ax.
So will the steady upward march of Priceline continue? Chances are, it will. The cut in consumer spending actually has benefited Priceline because of its positioning as a discount travel provider. Although fewer hotels and flights are booked, the desire for better deals has made Priceline a vendor of choice.
What's more, Priceline is booming because of its overseas growth. The company's most recent earnings report showed significant growth in Europe and emerging markets.
In short, Priceline shares shouldn't be making a landing anytime soon.
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[BRIEFING.COM] S&P futures vs fair value: -1.60. Nasdaq futures vs fair value: -1.80. U.S. equity futures remain under modest pressure even though most quarterly reports received since yesterday's closing bell have been better than expected. On that note, AT&T (T 35.60, -0.69), Boeing (BA 131.10, +3.55), Delta Air Lines (DAL 36.58, +1.63), Gilead Sciences (GILD 75.69, +2.83), and Yum! Brands (YUM 79.99, +2.51) all reported above-consensus earnings, ... More
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