Keeping an Eye on the Four 'New' Horsemen of Tech
According to Forbes, analyst Jonathan Krinsky of Miller Tabak recently drew an interesting parallel between four contemporary tech stocks – Facebook (NASDAQ: FB), LinkedIn (NYSE: LNKD), Netflix (NASDAQ: NFLX), and Tesla (NASDAQ: TSLA) – and the so-called “Four Horsemen” of the 1990s – Cisco (NASDAQ: CSCO), Dell (NASDAQ: DELL), Intel (NASDAQ: INTC) and Microsoft (NASDAQ: MSFT).
According to Krinsky, while the “Four Horsemen” of the late 90s were the afore-mentioned big market cap stocks.
Facebook, LinkedIn, Netflix and Tesla fill that role now.
Based on Krinsky’s analysis, Cisco, Dell, Intel and Microsoft, when converted into an equal-weighted index, gained 100 percent in 1998 and 225 percent by March 2000.
By comparison, an equal weighting of today’s leading quartet shows an increase of 205 percent this year and 230 percent over the past 12 months. The NASDAQ is up about 20 percent over the last 12 months.
Krinsky thinks the outperformance by these stocks is likely unsustainable, and will likely continue higher before the bubble bursts.
Krinsky’s favorite is Facebook. That stock has been above $50 since reclaiming its $38 IPO price in August.
LinkedIn and Netflix show less energy than Facebook. Tesla, Krinsky said, is a “wild card.” The stock has not closed below its 20-day moving average in three consecutive sessions since March and has had a 400 percent-plus run this year.
Meanwhile, Raymond James analyst, Aaron Kessler, downgraded Facebook from Strong Buy to Outperform Monday while raising the PT to $56 from $38.
As for Netflix, while maintaining a Buy rating on the stock, Rob Sanderson of MKM Partners boosted his price target from $285 to $370 Oct. 1.
Tesla was downgraded from Outperform to Neutral by Ben Kallo of Baird and has also been fighting off concerns generated by a highway fire in the battery compartment recently.
Short-seller James Chanos of Kynikos Associates said at a Wall Street Journal conference Monday, “The problem [with] Tesla and Netflix ... is they have gone beyond an interesting product or innovation, to becoming cult stocks, to becoming sort of investments or speculation despite the fundamentals.”
Krinsky closed by advising investors in the “Four New Horsemen,” to enjoy the run but keep an eye out for warning signs and the potential need to hedge.
At the time of this writing, Jim Probasco had no position in any mentioned securities.
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