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Tech companies have been taking heat over the past year, with massive valuation drops and stock prices plummeting amid rising interest rates.
Even with a looming recession, though, tech companies are still some of the biggest in the world — with several worth over $1 trillion!
Here we will take a look at how the top tech companies have performed, how their values stack up, and dive into some of the metrics that show whether they are a good value right now — or are still priced too high.
Apple (AAPL)
- Market Cap: $2.5 trillion
- Price-to-Earning Ratio (P/E Ratio): 26.4
- Layoffs (2022-2023): None
- Stock Price Drop (from all-time-high): 14%
Apple is the most valuable company in the world (in terms of market capitalization), with over $2 trillion in value. Apple continues to pump out innovative products, with its flagship iPhone and Mac computers leading the way, helping them retain their top spot.
In 2022, Apple stock prices dropped about 25%, as rising interest rates slowed growth, and investors rotated into more stable investments. But it has recovered a bit in 2023, and is only down about 14% from the previous all-time-high stock price in January of 2022.
Apple is one of the only tech companies to avoid mass layoffs, and has implemented several cost-cutting measures to keep it that way.
Apple’s Price-to-Earnings ratio of 26.4 seems more in line with industry standards than some of its tech peers that saw very inflated valuations just a few years ago. And while this is still historically high for the tech sector, it means Apple is more fairly valued than some other tech companies.
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Overall, Apple continues to be the model tech company for investors, showing stability in the face of economic turmoil. And with a large cash reserve and an innovative product team, they seem poised to continue growth for years to come.
Microsoft (MSFT)
- Market Cap: $2 trillion
- Price-to-Earning Ratio (P/E Ratio): 30.2
- Layoffs (2022-2023): 10,000
- Stock Price Drop (from all-time-high): 21%
Microsoft is the second most valuable company in the world, with a $2 trillion market cap and $200 billion in revenue per year. Microsoft offers a wide range of products, including personal and business software, as well as computers, tablets, and the Xbox gaming system.
In 2022, Microsoft stock prices dropped about 35% as most of the tech sector was crushed by rising rates. In 2023, the stock rebounded a bit, and is now only down about 21% from its previous all-time-high price in 2021.
In light of lower valuations and increasing cost of debt, Microsoft has laid off 10,000 employees as a cost-cutting measure, with layoffs scheduled to be completed by the third quarter of 2023.
Microsoft’s P/E ratio of 30.2 is a bit elevated compared to the industry, but it is far lower than the 50+ P.E. ratio it saw in 2017, and 35 ratio back in December of 2021. This might mean that Microsoft is slightly overvalued compared to the earnings it produces.
Overall, Microsoft has seen more downside than Apple, but is still one of the top companies in the world for a reason. As they place bets on Artificial Intelligence and the Metaverse, Microsoft is well-poised for the future of tech.
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Alphabet (GOOG)
- Market Cap: $1.3 trillion
- Price-to-Earning Ratio (P/E Ratio): 21.9
- Layoffs (2022-2023): 12,000
- Stock Price Drop (from all-time-high): 33%
Google is one of the only trillion-dollar companies in the world, and is the fourth most valuable company in the world by market cap. Google is the search engine king, garnering over 90% of the worldwide market share for search queries.
Google stock prices dropped significantly, dropping 40% between January and December of 2022. And Google stock is still down, priced 33% lower than its previous all-time-high price in February of 2022.
In response to rising rates, Google announced laying off 12,000 workers in 2023, which is the most of any tech company so far.
Google’s Price-to-Earnings ratio of 21.9 is reasonable compared to the inflated ratios of near 30 it saw in 2020 and 2021. This means that Google may be fairly valued based on their earnings and sector.
Overall, Google has no challengers in the search engine space, and is branching out into other products, including cloud services, internet services, and hardware products. But with competition heating up in the A.I., video (TikTok) and hardware space, Google has some challenges to overcome to continue growing.
Amazon (AMZN)
- Market Cap: $996 billion
- Price-to-Earning Ratio (P/E Ratio): 77
- Layoffs (2022-2023): 27,000
- Stock Price Drop (from all-time-high): 48%
Amazon is the fifth most valuable company in the world (by market cap), with over $990 billion in value. Amazon is the ultimate online shopping company, offering most every product under the sun, delivered to your doorstep. It also has a media arm and grocery store (Whole Foods), making it a powerhouse company.
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In 2022, due to economic headwinds, Amazon saw its first annual loss since 2014, and stock prices dropped about 50%. Part of this loss was due to unrealized losses for its investment in electric vehicle manufacturer Rivian.
But Amazon stock prices have only slightly recovered, and are still down 48% from all-time-high prices in November of 2021. Amazon also announced laying off 10,000 workers in 2023.
Amazon’s Price-to-Earnings ratio of 77 is astronomically high for the overall sector, about 3x its nearest competitors. But this is partially due to their continued investment in the company, causing earnings to slow, but investors see these investments paying off in the future.
Overall, Amazon may be overvalued to some, but others see the future as a huge growth opportunity for the tech giant.
Meta Platforms (META)
- Market Cap: $520 billion
- Price-to-Earning Ratio (P/E Ratio): 23.3
- Layoffs (2022-2023): 21,000
- Stock Price Drop (from all-time-high): 48%
Meta Platforms (Facebook) is the largest social media company in the world, and has over 3 billion users across its platforms. Facebook was the original company, but it has evolved and grown to include Instagram, WhatsApp, and other products and services.
In 2022, Meta Platforms stock prices dropped about 63% due to missed earnings reports, massive losses on its Reality Labs investments, and overall economic conditions. Stock prices have climbed a bit, but are still down 48% from the all-time-high prices in August of 2021.
Due to these massive losses, Meta has shed over 20,000 jobs since 2022.
With the massive price drop, Meta’s Price-to-Earnings ratio has come back to earth, settling at about 23. Some might see this as too high, but investing in Meta is betting on the future of the metaverse at this point, so there’s a potential massive upside. Overall, Meta Platforms continues to be a social media powerhouse, but competition is heating up.
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Bottom Line
Tech companies have taken a lot of heat in the past two years, but some of the biggest companies are doubling down on innovation and investing in the future. With Microsoft and Google focusing on artificial intelligence, and Apple and Meta focusing on virtual reality and the metaverse, there are exciting things coming.
However, investing in these companies requires understanding their valuations, future growth potential and marketplace competition. While stock price drops make it tempting to want to jump in and invest, things could still go down further. As always, education and understanding the risk of individual stock investing can help you make smarter money decisions.
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