Reality Check on Sky-High Tech Stocks
Just how expensive are major technology stocks?
The accompanying chart of 20 well-known tech names is ranked by the stocks’ estimated 2000 price-to-earnings ratios. That P/E is calculated by dividing the current stock price by Wall Street analysts’ consensus earnings per share estimate for fiscal 2000.
As the chart shows, P/Es are in the stratosphere for many issues.
Just as striking is how cheap the stocks now look in retrospect.
If, as justification for buying the stocks earlier, you had used 2000 earnings per share estimates in the ballpark of where analysts put them today, you would have been paying P/Es that were in many cases below the broad market P/E, as measured by the Standard & Poor’s 500 index.
Today, tech stock P/Es are not only high relative to the market but also relative to the companies’ projected five-year annualized growth rates. That doesn’t mean the stocks can’t rise further. But it’s a reminder that risk levels are that much higher.
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Tech Stock Giants: How Cheap (They Were)
Here’s a look at major technology stocks, their share price data for 1999, and their price-to-earnings (P/E) ratios today and at the end of last year, both based on analysts’ current consensus earnings-per-share estimates for 2000. Also shown is each company’s estimated five-year annualized earnings growth rate.
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Ticker 52- 52- Tues. ’00 ’00 P/E, P/E, week week Stock symbol high* low close year ago today Yahoo YHOO $408.31 $109.00 $405.56 177 605 EBay EBAY 234.00 55.31 144.38 223 401 America AOL 95.81 27.06 85.00 121 266 Online Qualcomm QCOM 500.88 25.13 496.88 7 128 Cisco CSCO 104.50 44.94 104.00 47 105 Systems Seagate SEG 45.25 25.13 42.98 70 100 Technology Oracle ORCL 99.38 21.00 97.69 27 92 Sun SUNW 83.00 20.44 74.88 24 85 Microsystems Vitesse VTSS 55.38 19.88 52.56 34 78 Semiconductor Microsoft MSFT 117.81 68.00 115.88 42 71 Texas TXN 111.50 41.88 106.63 20 49 Instruments Lucent LU 84.19 47.00 79.50 36 52 Technologies Dell DELL 55.00 31.38 49.75 36 49 Computer Motorola MOT 145.25 59.13 138.50 20 45 Tellabs TLAB 77.25 32.06 65.25 20 39 Hewlett HWP 118.44 63.38 108.75 20 32 -Packard Apple AAPL 118.00 32.00 102.50 13 32 Computer Intel INTC 89.50 50.13 82.88 22 31 Computer CSC 87.13 52.38 83.69 21 28 Sciences IBM IBM 139.19 80.88 110.13 21 26 S&P; 1,433.43 1,202.84 1,433.43 22 26 500 index
Est. 5-yr. growth Stock rate Yahoo 56% EBay 58 America 51 Online Qualcomm 35 Cisco 30 Systems Seagate 18 Technology Oracle 25 Sun 20 Microsystems Vitesse 38 Semiconductor Microsoft 25 Texas 23 Instruments Lucent 24 Technologies Dell 33 Computer Motorola 20 Tellabs 29 Hewlett 15 -Packard Apple 16 Computer Intel 20 Computer 18 Sciences IBM 13 S&P; 13 500 index
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* includes Tuesday’s trading
2000 earnings per share estimates from Zacks Investment Research
Source: Bloomberg News, Times research
