Afterpay, Apple and Amazon: is now the time to buy tech shares?
Technology stocks have had a volatile few weeks, but their share price growth remains outstanding. Anthony Keane explains what investors must consider before buying some now.
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It’s been a wild rollercoaster ride this year for anyone invested in technology stocks, and most of the time they’ve been cheering happily.
Whether it’s global giants Apple, Amazon and Facebook or local stars such as Afterpay and Zip Co, stocks with a technological edge have surged since the COVID-19 crash in March.
And most have been soaring for much longer than that.
The big question for investors and would-be investors whether these shares are now overpriced or still worth buying.
Unfortunately the answer depends on who you speak with, and may be as confusing as a Google algorithm or the inner workings of an iPhone.
Some share analysts say they have climbed too far too fast, while others say their growth can continue as they continue expanding internationally.
In just three years Afterpay shares have jumped from $4 to $74, and it has rapidly grown into Australia’s 17th largest company in terms of market capitalisation – bigger than Woodside Petroleum, Santos, Suncorp, AGL Energy and Qantas.
Fellow buy now, pay later provider Zip Co has climbed from 65c a share to $6 in the same period.
For sheer size, you can’t go past the US tech giants that have become the world’s biggest companies.
Sixteen months ago I wrote an article in which investment specialists warned that shares in Amazon, Apple, Facebook and Google owner Alphabet may struggle because their future growth appeared under pressure.
Oops – they got that wrong. Since then Apple shares have more than doubled, Amazon’s up 50 per cent, Alphabet added 40 per cent and Facebook rose 30 per cent.
Those gains have come despite the biggest global economic slump since the Great Depression.
Then there’s Tesla – half tech stock, half carmaker and builder of giant batteries in South Australia. Tesla’s share price has climbed ten-fold since mid-2019 as the world embraces its solar energy products and electric cars.
Founder Elon Musk is now worth more than $130 billion, and his business activities – including propelling astronauts from Earth in his SpaceX rockets – attract a new breed of investors.
One young Tesla shareholder phoned me earlier this month worried that the stock was dropping 20 per cent from its August record high. The best answer I could give was to expect volatility and if you can’t handle it, sell out now.
Many tech stocks have fallen 10-20 per cent in September, making them a better buying opportunity than they were in August.
But where to next? October starts in a few days, and that’s been history’s worst month for sharemarket crashes – think 1987 and 1929 – so you’d have to be brave to bet everything on tech stocks right now.
However, few industries on the planet have as bright a future as technology.
So the answer as to whether you should buy?
Yes, if you can stomach the ups and downs, buy on the dips, and have an investment time frame of at least seven to 10 years.
No, if you won’t sleep at night if the sharemarket suddenly slashes the value of your stocks by a third.