Techs Fared Worse Than Financials In Q1: The Plague Of The High PE

By Douglas A. McIntyre Published Apr 1, 5:01AM EDT

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With all of the carnage in the financial sector it would be hard to believe that any other group of stocks could have done worse. The technology sector claims that, for the most part, it has not done badly. Overseas business has helped offset slowing in the US, and almost every large tech company posted significant profits in the last reported quarter.

But, tech stocks, as a whole did not do as well as financials based on companies traded as part of the S&P 100. While Citigroup (NYSE: C) was down 29% and Merrill Lynch (NYSE: MER) was down 26%, Amazon (NASDAQ: AMZN) sank 25% and Google (NASDAQ: GOOG) was off 37%.

The list goes on, but the fact is that, looked at as a pool of the ten largest financial companies and ten largest techs, the "hot’ sector has a very bad quarter. Apple (NASDAQ: AAPL) may have been off 28% but Freddie Mac (NYSE: FRE) was down only 25%.

Some companies in each sector did fine, or, at least better than their peers. Cisco (NASDAQ: CSCO) and Oracle (NASDAQ ORCL) had more modest losses than most big firms in the sector. Ditto Bank of America (NYSE: BAC) and Morgan Stanley (NYSE: MS).

There is a reason techs did poorly, and, in a bad market, that is not likely to go away. Amazon still has a PE of 63. Even after a huge sell-off, Google’s is 33. VMWare’s (NASDAQ: VMW) is 70.

A stock market sell-off takes down the high-fliers just as fast as it does troubled sectors. Tech may have not found a price foundation.

Douglas A. McIntyre

About the Author Douglas A. McIntyre →

Douglas A. McIntyre is the co-founder, chief executive officer and editor in chief of 24/7 Wall St. and 24/7 Tempo. He has held these jobs since 2006.

McIntyre has written thousands of articles for 24/7 Wall St. He is an expert on corporate finance, the automotive industry, media companies and international finance. He has edited articles on national demographics, sports, personal income and travel.

His work has been quoted or mentioned in The New York Times, The Wall Street Journal, Los Angeles Times, The Washington Post, NBC News, Time, The New Yorker, HuffPost USA Today, Business Insider, Yahoo, AOL, MarketWatch, The Atlantic, Bloomberg, New York Post, Chicago Tribune, Forbes, The Guardian and many other major publications. McIntyre has been a guest on CNBC, the BBC and television and radio stations across the country.

A magna cum laude graduate of Harvard College, McIntyre also was president of The Harvard Advocate. Founded in 1866, the Advocate is the oldest college publication in the United States.

TheStreet.com, Comps.com and Edgar Online are some of the public companies for which McIntyre served on the board of directors. He was a Vicinity Corporation board member when the company was sold to Microsoft in 2002. He served on the audit committees of some of these companies.

McIntyre has been the CEO of FutureSource, a provider of trading terminals and news to commodities and futures traders. He was president of Switchboard, the online phone directory company. He served as chairman and CEO of On2 Technologies, the video compression company that provided video compression software for Adobe’s Flash. Google bought On2 in 2009.