Have technical valuations experienced a sharp decline this year. But after continuing to sell, it is now possible to claim that the sale has ended too far – that tech valuations are now suffering more than warranted in the wake of the 2020-2021 tech stock bubble.
US stocks opened lower again today, contributing to a miserable trading year. Technology stocks, in particular, have suffered defeat since hitting all-time highs in late 2021, much of which made sense.
After all, software companies have seen their value increase, not only thanks to growth during the pandemic, but also to growing revenue multiples. Those multiples extended into the stratosphere, so we’d expect them to be compressed as the market exuberance wears off.
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But the sell-off has now pushed the value of software companies below their pre-COVID price levels in some cases. This means that selected tech companies are now worth less than they were before the pandemic, despite a few years of growth at the bank.
With that in mind, here’s one chart’s argument that technical valuations have paid their dues and then some since the November 2021 highs: