There is a reason why Warren Buffett shies away from the most recent rise in technology stocks – they are not cheap businesses. Time and time again, investors are warned about the hot tech industry, comparing today’s market with that of the dot-com bubble. Analysts are pricing these stocks on relative metrics such as ‘Enterprise Value/unique visitors’ or ‘Enterprise Value/users’ – which is not always good representation of future cash flows. As well, analysts are also valuing these stocks against one another, overall accepting high trading multiples as ‘industry standard’. An EV/Revenue greater than 5 is not by any means ‘normal’, and the stocks on our list carry even greater risk.
Alibaba Group Holding Ltd. (NYSE: BABA) – $87.58
Internet Services
Alibaba Group Holding Limited is a China-based online and mobile commerce company in the retail and wholesale trade, as well as cloud computing and other services. The Company provides technology and services to enable consumers, merchants, and other participants to conduct commerce in its ecosystem. The Company operates Taobao Marketplace, an online shopping destination, Tmall, a third-party platform for brands and retailers and Juhuasuan. The Company provides the fundamental technology infrastructure and marketing reach to help businesses leverage the power of the Internet to establish an online presence and conduct commerce with consumers and businesses.
- Market Cap: $218,555,805,573
- P/E: 55.8x
- P/FCF: 44.8x
- EV/Revenue: 17.0x
Facebook Inc. (NASDAQ: FB) – $80.67
Internet Services
Facebook, Inc., is a social networking website company with a mission to give people the power to share and make the world open and connected. The Company’s business focuses on creating value for users, marketers, and developers. The Company engaging products that enable users to: Connect and Share with Friends, Discover and Learn, Express, and Stay Connected Everywhere. The Company’s products include: Facebook, Messenger, and Instagram. Facebook, mobile app and website enable people to connect, share, discover, and communicate with each other on mobile devices and personal computers.
- Market Cap: $226,540,417,965
- P/E: 80.6x
- P/FCF: 96.3x
- EV/Revenue: 15.9x
Twitter Inc. (NYSE: TWTR) – $35.88
Internet Services
Twitter, Inc. (Twitter) is a global platform for public self-expression and conversation in real time. It is a real-time platform, where any user can create a Tweet and any user can follow other users. Viewers can see photos, videos and conversations directly in Tweets to get the whole story at a glance, and all in one place. It offers Twitter apps for phones, tablets and computers. It generates its advertising revenue primarily from the sale of its three Promoted Products: Promoted Tweets, Promoted Accounts and Promoted Trends. Its users include millions of people from around the world, as well as influential individuals and organizations, such as government officials, celebrities, athletes, journalists, sports teams, media outlets and brands.
- Market Cap: $23,493,296,394
- P/E: -38.6x
- P/FCF: -41.1x
- EV/Revenue: 13.6x
Salesforce.com Inc. (NYSE: CRM) – $71.76
IT Services & Consulting
Salesforce.com Inc. is a provider of enterprise cloud computing solutions and provides a customer relationship management (CRM), applications through the Internet or cloud. The Company delivers its service through Internet browsers and mobile devices. It markets its social enterprise applications and platforms to businesses on a subscription basis, primarily through its direct sales efforts and indirectly through partners.
- Market Cap: $47,074,560,000
- P/E: -291.1x
- P/FCF: -203.5x
- EV/Revenue: 8.5x
