There is a “micro-bubble” in certain tech stocks, where valuations reflect expectations for future cash flows that would require unrealistically high margins, growth, and market share.
Tune into CNBC on Tuesday August 22 at 4 pm EST to learn more. New Constructs CEO, David Trainer, will discuss salesforce’s business and its current valuation.
This firm has seen seen margins contract as early success brought more competition. To try and offset competitors taking market share, the firm made numerous shareholder value-destroying acquisitions. Now the stock is pricing in aggressively optimistic improvements in revenue growth and profit margins.
This Danger Zone pick has seen its profitability decline as new competition has entered the scene. As the market commoditized, this firm’s negative margins and limited service offering undermined its ability to compete.
This stock is on the upswing and is up 23% year-to-date, while the S&P is up just 6%. The fundamentals of the business don’t justify this price move. In fact, negative margins, strong competition, and the overvalued stock price land Tableau Software (DATA) in the Danger Zone this week.
With losses piling up, a weak competitive position, and expectations of tremendous profitability already embedded in the stock price, PROS Holdings is in the Danger Zone this week.
Today’s news that Alphabet, Apple, and Disney are unlikely to bid for Twitter should come as no surprise. We think these companies (and many investors) are doing the same work we have done and simply cannot stomach paying anywhere close to Twitter’s current price.
Overpriced acquisitions are far from a new phenomenon, but they’ve been especially prevalent in recent months. As a result, we’ve gathered some ideas about the various reasons companies ignore the evidence and continue to overpay for acquisitions.