Gemma Godfrey's Advice On How To Value Tech Companies

Gemma Godfrey says there isn’t a bubble in the technology sector, but there are pockets of over-evaluation.

“It’s so important to differentiate between them,” she said.

Along with being CNBC’s first official contributor in Europe, Godfrey has been voted as the most popular business influencer in Europe and among the “savviest” on Wall Street by The Wall Street Journal.

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She recently joined Benzinga’s #PreMarket Prep to talk about how the tech sector is close to a bubble and how to pick the winners and losers.
Godfrey started by saying that there are many companies that enter the market with a lot of hype, but they won’t have any clear strategy on how to profit. She says this results in a pop and drop for the stock.

“The shares will pop the first day because they were oversubscribed,” she said. “And then as soon as people took a closer look at it, or they start reporting, people start to get a bit more sensible and the shares come off.”

However, Godfrey explained that there are still many companies in the tech sector with a proven track record and long-term plans.

“My big tip would be this: Revenue is vanity. Profit is sanity. Cash Flow is reality,” she said. “Ultimately, if you look at the cash flow of these companies, you’ll be in a better position to separate the winners from the losers,” she said.

Godfrey also talked about the European Central Bank, the Japanese economy and the bond market.

Check out her full interview here:

Don’t forget to tune in to Benzinga’s #PreMarket Prep broadcast Monday-Friday 8-9:45 a.m. ET for a live, interactive morning show with veteran traders and featured finance industry experts ready to answer your questions for the trading day.