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Towards the Pain Threshold VALUE.ABLE Roger Montgomery SECTOR TECHNOLOGY Towards the pain threshold NetflixNetflixNetflix share share share price price price TeslaTeslaTesla share share share price price price 51Job51Job51Job share share share price price price The higher that stocks such as Amazon and Uber go, the further they have to fall $US350$US350$US350 $US400$US400$US400 $US100$US100$US100 $US380$US380$US380 $US90$US90$US90 $US300$US300$US300 $US360$US360$US360 s the bull market progressed, While much of the commentary during court, the Luxembourg-based European $US80$US80$US80 an over-dependence on a hyper- the recent technology boom lauded the Court of Justice, responded to a complaint $US250$US250$US250 $US340$US340$US340 narrow band of technology stocks superiority of everything from the disrup- by Barcelona taxi drivers who wanted to $US70$US70$US70 A $US320$US320$US320 has transpired. The investment universe tive asset-sharing models of Uber and Air- prevent Uber from setting up in the city. $US60$US60$US60 has not seen so much capital concentrated bnb to 3D printing, the underlying business The court agreed that Uber drivers should $US200$US200$US200 $US300$US300$US300 in a single sector which, through ETFs, models of many operators remain unviable be regulated like a transport company and $US280$US280$US280 $US50$US50$US50 can be sold at the click of a mouse. without the support of private equity injec- not a technology service. $US150$US150$US150 Meanwhile, the emerging perception of tions at increasing valuations. Where this In Europe, a set of sweeping reforms $US260$US260$US260 $US40$US40$US40 increased regulatory risk for FAANG is the case, investors need to be especially under the banner of the general data protec- $US100$US100$US100 $US240$US240$US240 $US30$US30$US30 stocks (Facebook, Apple, Amazon, Netflix cautious. By way of example, Tesla and tion regulation (GDPR) will be established MayMayMayJulJulJulSepSepSepNovNovNovJanJanJanMarMarMar MayMayMayJulJulJulSepSepSepNovNovNovJanJanJanMarMarMar MayMayMayJulJulJulSepSepSepNovNovNovJanJanJanMarMarMar and Google) has not only capped prices, it Uber continue to be loss-making despite shortly. Under the GDPR, European resi- has served as an important reminder that despite valuations of about $US51 billion dents will have control over how their digi- ❶ ❷ ❸ excess profitability cannot be extended ($64 billion) and $US60 billion respectively. tal data is used and arranged, including the Netflix NASDAQ code Tesla NASDAQ code 51job NASDAQ code Netflix hit a record Elon Musk has Founded in 1998 and indefinitely and will always come up Meanwhile, Amazon is being openly “right to be forgotten”. They will have the NFLX TSLA JOBS against an opposite force. That may be attacked by the US president on Twitter, power to remove or update data on company 117.6 million subscribers Price $US311.65 impressively built from Price $US300.34 listed in the US, 51job Price $US91.27 in the last quarter of scratch a car marketing Inc is headquartered in competition but it may also take the form of Tesla and Uber’s autonomous vehicles servers, be able to request the data and 52wk ▲ $US333.98 52wk ▲ $US389.61 52wk ▲ $US92.63 societal rejection or regulatory backlash. have killed people, setting port it to another company. 2017. This was thanks and manufacturing Shanghai. The company 52wk ▼ $US138.66 52wk ▼ $US244.59 52wk ▼ $US37 Listed among the 10 most valuable compa- back projected start dates for Today, even with tech stocks reach- to the addition of machine that in provides human Mkt cap $US135bn Mkt cap $US51bn Mkt cap $US5.6bn nies in the world, Google dominates search an autonomous driving future, ing a threshold commonly described 6.4 million international 2018 is expected to resource outsourcing Dividend – Dividend – Dividend – with a 90% share, Facebook commands and Airbnb hosts are being lev- as correction territory, bullish senti- and 1.9 million US generate sales of and consulting, as well Dividend yield – Dividend yield – Dividend yield – 88% of social media traffic in the US and ied with conditions that limit ment remains. We note that, accord- subscribers. International between $US14 billion as recruitment solutions, PE ratio 218 PE ratio – PE ratio 95 by some accounts nearly half of Americans short-term leasing. ing to The Wall Street Journal, 91% subscribers grew 11% in and $US26 billion. training and assessment. obtain their news from Facebook. By 2016, It was inevitable that as these of analysts maintained a “buy” or the fourth quarter from n SELL The achievement n SELL 51job has a long runway n BUY the share of online US consumers bypassing companies gained unprecedent- “overweight” recommendation for the third quarter and US is phenomenal. of revenue and earnings search engines in preference for Amazon ed power there would be a soci- Facebook, Amazon and Google and, subscribers grew at just under 4%. In 2017 the More phenomenal is Tesla’s market cap of growth ahead as more employers migrate to was 55% and the biggest Chinese tech com- etal or regulatory response. according to FactSet, tech compa- number of international Netflix subscribers about $US50 billion, having produced only online advertising for jobs. Meanwhile, the panies, including Tencent and Alibaba, com- In the US, the Democrats, who nies in the S&P500 are expected surpassed US domestic subscribers. about 100,000 vehicles last year. Ford has a company has put through a range of price mand similar or even larger shares. were arguably defeated at the last to post year-on-year earnings While the company is expected to earn market cap of $US44 billion and total global increases of up to 45%. Previously, and for six As recently as February, the NYSE election because they cosied up to growth of 22%. between $US1.88 and $US3.27 a share, sales of 6.6 million units. Remember, these years, a one-month membership with 20 job FANG+ Index (also including Baidu, Netflix, big business, are returning to their There is no reason that tech the stock is trading at between 74 and 153 companies are in the same industry. listings would cost an advertiser 600 yuan Alibaba, Nvidia, Tesla and Twitter) was col- roots with an election blueprint stocks, especially unprofitable times earnings. It faces extra competition In 2017 Tesla burned more than $US2 billion ($123). As of February 1, the price increased to lectively valued at multiples of three times and new economic agenda ahead of ones, are precluded from rising after Disney announced in November that and is expected to spend more in 2018. But between 800 yuan and 1000 yuan. that of the broader market. The divergence the November mid-terms called “A substantially after the recent its own two largest franchises, Star Wars the company has a cash balance of just These price increases carry no incremental is even greater than during the peak of the Better Deal”. The section of “A Bet- conniptions are digested but the and Marvel, will move exclusively to Disney’s $US3 billion. It has said that it won’t need to costs and will boost margins beyond the tech bubble in 2000. While the S&P500 has ter Deal” entitled “Crack- higher they go the greater the sub- own streaming service from 2019. Fourteen raise money to ramp up model 3 production. strong increases of 2.5% year on year in the advanced a phenomenal 331% in the nine ing Down on Corporate sequent pain for investors who Disney films have grossed more than $1 billion But in 2016 Musk said Tesla wouldn’t need to fourth quarter of 2017. years since 2009, Amazon is up over 2100%, Monopolies and the don’t rotate into more defensive worldwide, including two Star Wars releases raise capital, but then raised money twice in Despite a 128% increase in the share price in Apple 1100%, Netflix 5300% and Google Abuse of Economic sectors such as healthcare and and four Marvel movies. 2017 to the tune of about $US3 billion in mixed the past 12 months to over $US88, we believe 586%. Add Facebook, Microsoft and Nvidia and Political Power” is perhaps utilities. With 55 million Netflix subscribers in the US, equity-debt offerings. there is value and currently estimate the to that list and eight stocks now account for focused entirely on antitrust compared with 94 million pay TV subscribers, In 2018 the company is expected to lose company’s intrinsic value at circa $US100. over 15% of the entire S&P500 and just shy enforcement and merger law, Roger Montgomery is 8 and a steeper growth trajectory, 40 of the 56 between $US0.64 and $US12.58 a share. This -1 Apr of 50% of the NASDAQ-100 index. the most important but argu- founder and CIO at the - analysts covering Netflix have a “buy” rating compares with a share price of $US289 at At the time of writing, Netflix trades at a ably weakest component of Montgomery Fund. 3 and only two have a “sell” rating. We believe the time of writing. We believe Tesla’s bond PE of 218 times earnings and Amazon.com America’s competition policy. For his book, Value.Able, the most expensive tech names are at the investors, who have been selling aggressively, trades at 312 times. Facebook and Goog- Meanwhile, in a decision see rogermontgomery.com. greatest risk of disappointment. have the picture right and equity investors le-parent Alphabet, both of which have with far-reaching con- Disclaimer: The Mont- have yet to catch on. been directly linked with privacy concerns, sequences for many tech gomery Global Fund owns now trade at valuations near 52-week lows. companies, Europe’s highest shares in 51Job. Prices as at close of business, 1 close of as at Prices 86 MONEY MAY 2018 MONEY MAY 2018 87.
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