According to the American investment bank, Growth stocks don't look cheap even after they fall.
There is room to fall
J. P. Morgan has calculated: shares of a mid-sized tech company with no earnings over the past five months have fallen by 30%. And fintech papers, who develop financial applications, sank on 40%.
“Growth stocks have weakened lately, their score has gone down, but they still don't look cheap", — noted in the bank. Analysts added, that banks and oil companies, who benefit from rising interest rates and commodity prices, still "not so expensive".
Future interest rate hike also reduces market propensity for high risk, count at J.P. Morgan. Years of soft policies have fueled the rise of tech stocks., and now investors are selling overvalued companies.
"We believe, that bond yields will continue to rise throughout the year. Our target yield on 10-year US Treasuries is 2,35% by the end of this year", bank said.
Worse, than in 2020
In November 2020, Pfizer was the first to announce a successful COVID-19 vaccine trial.. Then Wall Street analysts said: growth companies will lose popularity, and value companies will take their place. And so it happened.
“There are many unprofitable and overvalued companies on the market. They may still fall. down to zero", - Fortune quotes the head of the investment company New Constructs, David Trainer.
In recent months, the income growth of the so-called pandemic beneficiaries has slowed down and their shares have begun to fall.. As a result, these shares bring investors even more losses., than during the coronavirus collapse.
For example, in February - March 2020, PayPal promotions, Twitter, Meta and Netflix have lost by 20 to 40%. According to data on 22 February this year, the shares of the same companies sank from their historical maximum by 40-70%.
Investment company Ritholtz expects, that the bearish trend in the tech sector may be prolonged: “Microsoft updated the 1999 maximum only through 16 years. Intel and Cisco are still cheaper, than in those glorious days. Investors should not think, that stocks that have fallen by 50-80% will soon renew highs ".
