Tech stocks are off to a hot start in 2023 after a horrible year in 2022. Unfortunately, while tech stocks have come back to life in recent weeks, DataTrek Research co-founder Nicholas Colas is the latest market expert warning investors to approach big tech stocks cautiously.
The Numbers: On Monday, Colas took an updated look at the valuations of top tech stocks, including compiling the current forward earnings multiples for several top names:
- Amazon.com, Inc. AMZN, 81.2 forward PE.
- NVIDIA Corporation NVDA, 54.7 forward PE.
- Tesla Inc TSLA, 48.6 forward PE.
- Microsoft Corp MSFT, 27 forward PE.
- Apple, Inc. AAPL, 25.6 forward PE.
- Alphabet, Inc. GOOG GOOGL, 21.5 forward PE.
- Meta Platforms, Inc. META, 21.6 forward PE.
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Colas said all the big tech stocks mentioned now have forward PE ratios significantly higher than the S&P 500's overall forward earnings multiple of 18.4.
"Nothing in this space is 'cheap' anymore, thanks to the last 5 weeks’ rally in these names," Colas said.
How To Play It: Colas said the huge 2023 rally in tech stocks has not been driven by improving fundamentals, and is likely instead being propelled by an end to tax loss selling.
"Many of these names have essentially had great years in the last month; we would be careful with them here," Colas said.
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Benzinga's Take: Colas' warning on tech stocks comes roughly a week after Morgan Stanley analyst Michael Wilson urged investors not to fight the Federal Reserve, which is expected to raise interest rates by yet another 0.25% in March. It's extremely difficult to make the case for U.S. earnings growth and S&P 500 valuation upside until the Fed at least stops raising interest rates.
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