No, this is not like the 2000 tech bubble...

Not even close.

https://twitter.com/awealthofcs/status/1111610065650442248

Those were truly insane times.

Matt
Phoenix 1 Contributor
MasterCard (MA), PayPal (PYPL), and Square (SQ) Ticker Guide
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The Lyft IPO gives me pause… $24 billion for a taxi replacement service? And Pinterest? C’mon.

🆁🅶🅱
wordlessly watching, he waits by the window and wonders…

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No, this is not like the 2000 tech bubble… Not even close!

Matt, I think anyone who is comparing this to the tech bubble isn’t old enough to remember it, or wasn’t in the market back then. Your link article gives examples of companies selling at 3000 or 5000 times sales. I remember a lot of companies that didn’t have ANY revenue yet, but they had successful IPOs. No revenue. They just had an interesting idea for making revenue. And they raised bundles of money. I remember a famous analyst (still famous) saying XYZ is “a bargain” at 200 times sales, because “comparables” were selling at 400 times sales. I remember Jeff Bezos saying “I appreciate the confidence folks, but 200 times sales is way overvalued for us. We’re just a book store, after all.” (At the time that’s what they were.) That’s what the tech bubble was like! The current market has nothing to do with that insanity.
Saul

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2000 tech bubble is perfectly analogous to the marijuana bubble that currently exists.

High valuations with no sales to speak of. No evidence of rapid growth. Just prospects and rumors.

SaaS is not a bubble, rather, a strategy for businesses to reduce O&M by reducing FTE and relying on outside services. Those services not only are 1:1 replacements, but they often connect the business with more resources than they previously had.

As for concern on their overall valuation… the market has always provided a premium to high growth, high margin companies… the market’s tolerance for that premium is a macro shift that you can’t hide from in other sectors of the market.

Just a Fool

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I remember Jeff Bezos saying "I appreciate the confidence folks, but 200 times sales is way overvalued for us.

In 1999 Amazon revenues were $1,639,839
Diluted share count was 326,753

(Both figures in thousands)

That gives a revenue per share of $5. Max share price in 1999 was $113, giving a P/S ratio of 23 (i.e. not 200)

Unless I have missed something here, that quote does not seem quite correct.

Incidentally the share price low in 2000 was $14.88, so those buying at $113 took quite a bath.

Ian

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Amazon’s margins were dreadful if I recall. They were a internet seller of physical books and the shipping costs were an incredible burden on them.

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I opened my first restaurant in a bedroom community of Silicon Valley in 1998. I witnessed first the creation of instant wealth from the moment we opened our doors. I also had a good friend who was an appraiser, he would come on almost daily for lunch or dinner and always have mind blowing stories about the latest real estate purchases in Carmel and Pebble Beach. Couples in their early 20s driving down from the Bay Area and purchasing homes for 12 million along the Pebble Beach coastline and literally having them torn down to build their own dream homes.

I knew then that a bubble had formed, was doubling in size every few months and was about to burst.

Saul is very correct. Unless you were around for that bubble, for all those Pets.com companies being taken public and with them mailroom kids becoming millionaires overnight, you don’t understand what was really going on.

There is zero comparison between that Silicon Valley bubble and today’s tech world.

Chris

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Incidentally the share price low in 2000 was $14.88, so those buying at $113 took quite a bath.

But if they held until today they’d have a CAGR over 15.5%. Still beating the S&P.

I bought my first mutual funds in 1990. I found the Fool in 1999 and realized that even little old me could by individual stocks. I learned a lot from the crash in 2000.

I have bought positions in quite a few SAAS companies. They don’t remind me of 1999 at all.

Fool on,

mazske

All positions are in my profile except for my rental properties bought over the past 26 months.

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Not even close.

While that is true, if you are invested in aggressive growth stocks when the recession hits it may not make a big difference in practice.

In this case, the difference might, for example, be an 85% loss rather than a 95% loss.
While retaining 15% of your money is much better than retaining 5%, it still sucks.

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The tech bubble vs. what bubble?

S&P 500: https://invest.kleinnet.com/bmw1/stats40/^GSPC.html

NASDAQ: https://invest.kleinnet.com/bmw1/stats40/^IXIC.html

Denny Schlesinger

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