Credit:<\/span>Juanita Wilson<\/cite><\/p>\nThe sell-off came after the company reported user growth had slowed as it faces rising competition from Chinese giant TikTok, triggering investor concerns that the US social media behemoth had hit a ceiling in its growth trajectory.<\/p>\n
Mr Wilson, chair and chief investment officer of Wilson Asset Management, said the days of \u201ctechnology stocks going up forever\u201d were over. \u201cIs this the start of a tech wreck?\u201d he said. \u201cWe\u2019ve already seen a significant crunching of value in the technology sector. It\u2019s really got to come back to fundamentals.\u201d<\/p>\n
Mr Wilson said the technology sector would continue to benefit from digitisation trends, but rising interest rates to curb inflation presented significant headwinds. \u201cThe risk is you could have a perfect storm. Which is not positive in terms of broadly, costs going up, while revenues stagnating.\u201d<\/p>\n
Perpetual\u2019s head of investment Matt Sherwood said the reining in of fiscal and monetary stimulus globally would give the technology stocks a \u201cprice hammering\u201d by taking out \u201ca lot of the tailwinds\u201d the sector has enjoyed for nearly two years.<\/p>\n
Mr Sherwood said some technology stock valuations had become so inflated that it would be difficult to see future gains in companies that do not have business plans with strong underlying earnings growth.<\/p>\n
\u201cSome very famous names are trading on 30 times earnings and given how developed their businesses are and what a massive market share they have, it\u2019s going to be really, really challenging for those companies to continue to grow profits at a rate that justifies the multiple.\u201d<\/p>\n
However, Holon Global Investments research director Tim Davies said his team was preparing to take advantage of Facebook\u2019s sliding share price by buying stock while it\u2019s cheap. Mr Davies said the user growth had slowed because the company has sought to remove \u201cdeadwood accounts\u201d.<\/p>\n
\u201cIt makes numbers and subscribers look less but it\u2019s really just a cleanout with is healthy for their business, rather than customers with accounts that do nothing.\u201d<\/p>\n
Mr Davies said he was \u201csuper excited\u201d about Facebook\u2019s work in virtual reality and digital payments, which will drive its next phase of growth. \u201cWe\u2019re getting to a world where people are sick and tired of staring at the screen.<\/p>\n
\u201cI\u2019ve got myself an Oculus [VR] headset … it is game-changing relative to the traditional screen medium we look in. We see massive upside to that.\u201d <\/p>\n
Mr Davies said his team was \u201cdigesting the impact of TikTok\u201d but added Facebook, which owns Instagram, Whatsapp and other companies, was well positioned to benefit from the ongoing digital trends. \u201cWe think it\u2019s a phenomenal company if you look medium to long term.\u201d<\/p>\n
However, Bell Asset Management chief investment officer Ned Bell said the market did not have time for \u201cpipe dreams\u201d in an environment of high inflation and rising interest rates.<\/p>\n
\u201cThey can talk about that as much as they want, but unless it\u2019s going to materialise in earnings, I don\u2019t think the market will give it much credit.\u201d<\/p>\n
Mr Bell manages a $3.2 billion global equities portfolio and sold all his Facebook stocks last October after rising concerns about growth and competition from TikTok, as well as governance concerns around the company\u2019s approach to data security.<\/p>\n
He said the outlook for technology stocks \u201cfeels very familiar to late 2000\u201d, referring to the dotcom bubble where over-valued technology companies crashed. \u201cAnything with no earnings, it\u2019s musical chairs, the music stops and they drop like stones,\u201d Mr Bell said. \u201cYou\u2019ve seen that right across the board. They\u2019re pretty savage, some of those falls.\u201d<\/p>\n
Wilson Asset Management\u2019s global portfolio manager Nick Healy agreed, claiming TikTok was the first time Facebook has come up against a \u201cproper competitor\u201d that it had not been able to buy or copy. \u201cWe haven\u2019t run the ruler at its current price, but the challenges feel more structural than one-off.\u201d<\/p>\n
The Market Recap newsletter is a wrap of the day\u2019s trading. <\/i><\/b>Get it each weekday afternoon<\/i><\/b>.<\/i><\/b><\/p>\nMost Viewed in Business<\/h2>\nFrom our partners<\/h3>\n
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