Following up on the earlier post on new tech growth company valuations, here’s some current information on large cap tech valuations.
Since some big tech companies now have gargantuan cash reserves. I like to look at the Price/Earnings ratios adjusted for cash on balance sheet.
Apple, the shining jewel of American capitalism, has chinned all the way up to the 2014 estimated Price/Earnings ex-cash of 11.2. Google, the company everyone agrees is the General Electric of the 21st century: 2014 Price/Earnings ex-cash of 19.4. Big legacy tech foursome 2014 Price/Earnings ex-cash: Oracle 12.6, IBM 11.1, Microsoft 10.7, Cisco 9.5.
These are still so low as to qualify as generational lows. Public tech Price/Earnings haven’t traded this low, for this long, since the 1970s. I’ve said it before and I’ll stay it again: If this is a new tech bubble, it’s managing to bypass all of the big public tech companies. So to rationalize all of this, you pretty much have to believe one of three things:
- This is the weirdest equity bubble ever. It ignores the large capital companies that are easy to trade which is not what happened in the late 90’s.
- The public market is still scarred after the 2000 and 2008 crashes, hates tech equities, except a handful of companies delivering rare growth.
- Many large-capital technology companies are in dire trouble. They are about to be taken apart by a new generation of disruptive challengers.