Big-Tech Stocks Lose $400 Billion- And They’re Still Expensive

This week’s $370 billion big tech selloff amid a broader rally in the market did nothing to change the view that the stocks are still too expensive.

No big-name Wall Street types are out there declaring them cheap, and investors have actually come to see them as more dangerous rather than more attractive after the rout, irrespective of Friday’s rebound.

As the week went on and the ugly earnings reports piled up, investors frantically scooped up put options that protect themselves from further losses.

Yes, the likes of Alphabet Inc., Amazon.com Inc. and Microsoft Corp. are less expensive after the selloff, but they are far from obvious bargains. Part of the problem, says Mark Haefele, the chief investment officer at UBS Global Wealth Management, is that analysts now need to mark down their earnings estimates for these companies to reflect the weakening economic fundamentals highlighted in the third-quarter reports. And as those estimates come down, the stocks’ valuations based on projected profits will bounce right back up.

“Earnings estimates for tech look too high given elevated US inflation, declining corporate confidence and a tightening of financial conditions,” Haefele said.