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Is Mark Cuban Right About 2015's Tech Bubble? Analysts Weigh In


Famed investor Mark Cuban thinks that the tech industry is in a worse bubble than the one it endured in 2000.

Analysts concur with this assessment, but that's where their agreements end. "I think he's right on," Sean Udall, CIO of Quantum Trading Strategies and author of The TechStrat Report, told Benzinga. "I totally agree."

Udall can't understand how a company like Snapchat could have a valuation of $20 billion, while Twitter Inc's (NYSE: TWTR) market cap is $30 billion.

He's equally baffled by the price Facebook Inc (NASDAQ: FB) paid for WhatsApp.

"I was major Facebook bull," said Udall. "I really liked the company until they made the most grossly overpay of all time, when they bought WhatsApp."

He said he could not own the company anymore after it paid $19 billion for WhatsApp. He also said that he would short Uber and Snapchat right now, but that won't be possible unless they go public.

"Uber is a great service," Udall added. "[But] I don't get the valuation. Uber has a ton of business risk. There's a good chance that Uber (in its current form) won't even be around in three to five years."

Related Link: Doug Kass On Bubbles, Forecasting, Social Media And More

The Importance Of Bubbles

Global Equities Research analyst Trip Chowdhry has found the silver lining in tech bubbles.

"Bubbles are really important in the economy," Chowdhry told Benzinga. "Why? Because it destroys conventional wisdom. It destroys complacency. Think about how many companies have disappeared. Think about who was the king of the planet: Microsoft. Where are they now?"

Chowdhry said that bubbles are a "must" that break the status quo and force people to think outside the box.

"I think bubbles are important because it pushes civilization forward," he added. A bubble will eventually stop companies from receiving overinflated valuations, which could prevent future mistakes from occurring.

"Twitter, Facebook and Alibaba got very rich valuations in the private market and secondary market," said Chowdhry.

"When they went to the public market, they failed miserably. Why? There was no upside left."

Chowdhry said that doesn't mean these are bad companies but noted that investors don't want to buy into a company that is already at its peak. At the time of their IPOs, it did not appear that Twitter, Facebook or Alibaba had anywhere else to go.

Disclosure: At the time of this writing, Louis Bedigian had no position in the equities mentioned in this report.

Posted-In: Facebook Global Equities Research Sean Udall SnapChat Trip Chowdhry twitterAnalyst Color Tech


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