Will technology stocks rebound?

Last year, in 2021, you could purchase excellent tech stocks at a price that appeared to be a steal…

Spotify costing $305

$404 for Zoom Video Communications

Roku Inc at $490

$1,000 for Netflix

The market at the moment was filled with enthusiasm. Specifically, technology stocks were rising. It appeared like the market for high-growth, forward-looking technology equities would never decline.

The music then ceased.

Not only did technology stocks drop, but they were completely wiped out.

Today, the above-mentioned stocks can be purchased at bargain basement rates of…

Spotify is now $115, a 62 percent decrease.

Zoom Video Communications at $110 – a reduction of 72%

Roku Inc at $95 – an 80 percent decline

Netflix is now $223, a 68 percent decrease.

This is a small sample of a sector that has seen declines ranging from 50% to 90% (and more).

It has always been a difficult market to navigate.

Things have been awful since the towering heights of 2021, but it’s not as horrible as it may seem.

However, what individuals want to know most is…

Will tech stocks continue to decline?

What exactly do we mean when we use the term “technology stock”? Don’t all businesses employ technology today?

The majority of the time, they do.

In the context of the market, however, tech stocks refer to any stock associated with the technology sector, from software providers to semiconductor makers and even cryptocurrency companies.

As previously said, technology stocks have experienced a severe decline over the past year.

Since its peak on November 18, 2021, the Nasdaq 100, an indicator of the largest, most actively traded tech-focused firms, has declined by 39.5%.

The last time the Nasdaq dropped this much was in 2008, when the global financial crisis (GFC) was at its worst.

There are also other indications that things may decline further. As the global economy tightens, the full-year earnings of many technology companies remain unknown. If profits disappoint and the global economy slows, many tech stocks may be confronted by reality.

Consider Roku, which still trades at a price-to-earnings (PE) ratio of approximately 94.

Very high PE ratios might be indicative of an expensive stock relative to its real earnings. It might also indicate that the market anticipates robust future growth… In a market that is collapsing, however, high PE ratios might be an indicator of more pain to come when prices revert closer to the company’s actual earnings.

Will technology stocks recover?

It depends on your definition of “recovery.” In early 2000, the Nasdaq 100 index reached all-time highs. The bubble in technology, media, and telecommunications (TMT) equities (also known as dotcom stocks) then burst. The market bottomed out in late 2002… more than two years later.

In the subsequent five years, the market grew by more than twofold. From the bottom, it appears like a recovery has begun. However, the overall index did not surpass the all-time highs until mid-2016, beginning in early 2000!

Approximately 16 years after the TMT/dotcom market peaked, the market has largely recovered.

Thus, recuperation is always a problematic term. When examining an overall index, recuperation can take a considerable amount of time. But within a recovery, there are several opportunities to generate income.

In declining markets, rising markets, and in fact, all markets, there are opportunities to make money through intelligent investments.

Also, even though the markets go up and down and go through collapses and crises, they always come back in the long run.

When you have a long-term investment view, markets not only recover, but they also provide long-term returns.

Even though it may take many companies a few years to get back on their feet, we expect the market to recover and eventually reach new all-time highs.

However, it should be noted that some businesses will not survive at all. There will be failed businesses. There are stocks that will lose investors their entire investment. However, we feel that investing in tech stocks over the long run remains one of the most interesting ways to participate in the market.

Does this make technology companies an attractive investment?

It depends on the type of technology stock you are analysing. Several big IT companies in industries that are changing the world, like cryptocurrencies, have seen their stock prices drop. This gives investors who understand the potential of this new asset class a great chance to buy.

Smaller tech businesses in areas that have been struggling for some time may not be a wise investment. This includes industries like semiconductors, which have had shortages and problems with their supply chains for almost three years.

Numerous high-growth companies with almost no earnings that were trading at astronomical valuations have collapsed. However, larger businesses with solid profitability and reasonable multiples have performed reasonably well.

Apple is trading almost 15% below its 52-week high.

Amazon is trading almost 34% below its 52-week high.

Microsoft is trading almost 24% below its 52-week high.

Still, it is undesirable to see stocks in the red. Nonetheless, while others are down 80% or 90%, these tech giants have remained stable.

For every investment in the technology sector, it’s important to look at the basics and the money.

In other words, tech companies are a good investment, but you must evaluate them on a case-by-case basis in relation to your investment plan and portfolio.

Should I now sell my technology stocks?

Fear and uncertainty may quickly permeate a market. This is precisely what we have observed over the past few months. And it can cause many investors to abandon their strategies and abandon the market.

However, now is not the time to panic.

Frequently, you will hear of investors purchasing high and selling low. This is because both the psychological and practical parts of investing are important to success.

You don’t want to hold on to losers forever, but you must also evaluate the likelihood of a rebound.

Ask yourself why you invested to begin with. What prompted you to hit the buy button? Other than the pricing, have any other changes occurred? Is the company financially resilient enough to withstand a few years of an economic downturn? Can they continue to innovate and develop even if global markets continue to decline?

If nothing has changed except for sentiment, you may want to rethink pressing the sell button and locking up your losses.

When markets are in this state, everything may appear dismal, but they seldom remain this way permanently. The best thing to do is to be patient, keep a cool head, and stick to your investment plan.