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Taking Stock Of The Tech Selloff

Morning Report: Tech stocks are down. Again. Here’s how much you should worry.

The Nasdaq is off just over a percent this morning to 6,937 and change. That’s under the notable 7,000 point threshold, and far below its 52-week (and all time) high of 7,637. Other indices have taken a beating as well.

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So how bad is the carnage, and should we care? Let’s go through some of the damage before we try to answer the second question. Bear in mind, of course, that the Nasdaq hit its records earlier this month. That’s just weeks ago.

Yesterday, the Nasdaq vomited almost 3 percent onto its own shirt, as some of tech’s hottest companies gave back ground. Here’s a narrated butcher’s report, via CNBC:

Facebook shares contributed to tech’s losses, as they fell 4.9 percent after Bank of America Merrill Lynch reduced its price target on the stock for the second time in five days.  […]

Tech shares were also under pressure after Reuters reported Nvidia is temporarily suspending self-driving tests. The news sent the stock down 7.8 percent. Tesla shares also fell 8.2 percent […]

Twitter fell 12 percent after short-seller Andrew Left said he is betting against the stock. […] Netflix declined more than 6.1 percent.

But that is only part of the picture. Here are another set of numbers to help contextualize the recent tech selloff:

  • On average, the Big 5 (Apple, Amazon, Facebook, Google, Microsoft) are off 13.64 percent from their 52-week highs—also their all-time highs.
  • Microsoft is off the least, falling just 8.18 percent from its all-time high. Facebook is off the most, having given back over 22 percent of its worth.
  • After putting down even more yesterday, the big five have shed around $55 billion in value today alone.
  • Only two 2017 U.S.-listed technology IPOs are up today; the rest are down.
  • A single 2016 U.S.-listed technology IPO is up today; the rest are down.

And we don’t have a real-time listing from the Bessemer Cloud Index, but Alteryx is down, Cloudera is down, Okta is down, Yext is down, as are Dropbox, Hubspot, Atlassian, Workday, Box, and others. So, presumably, cloud stocks are in the middle of a rough patch.

All that sums to the following: tech shares are somewhat correcting across both size and sector. However, what’s to keep in mind is that these firms are still richly valued. The Nasdaq only ripped through the 7,000 mark for the first time earlier this year (it’s March). And investors are still paying over 27 times Microsoft’s earnings, along with over 31 times Google’s (Google Finance API data). And don’t forget what Salesforce just paid for Mulesoft (a lot) and how well Dropbox just did in its public offering (super well).

So tech is still doing very well, just not as good as it was.

From The Crunchbase Daily:

Oscar Health raises $165M

  • The giant funding rounds keep coming. Now it’s insurance provider Oscar Health, which has raised $165 million at a reported $3 billion valuation. The five-year-old, New York-based company is co-founded by Josh Kushner, brother of Jared Kushner.

Lightspeed files for $1.8B fund

  • VC firms are scaling up too. Technology VC Lightspeed Venture Partners just filed to raise $1.8 billion for its latest fund, which will be its largest ever. The filing follows a string of big exits for the Silicon Valley firm, which was an early investor in Snap, MuleSoft, AppDynamics and others.

Shyp shutters delivery service

  • Shyp, a service for packing and shipping items, is shutting down. Founded in 2013, Shyp had raised over $60 million in venture funding. Its CEO points to an early focus on chasing consumers rather than businesses as a key factor behind the company’s losses.

Lights out at Lytro

  • VR camera maker Lytro is closing down after raising $215 million over the past decade. A large number of employees will reportedly now be joining Google.
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