Another Technology Stock bubble?

[erpowers]

Does anyone at DU think there is a new technology stock bubble? With the news of IPOs from companies like Pandora and Linkedin I have begun to wonder if they there is another technology stock bubble. As far as I know during the technology stock buble of the 90s technology companies were putting forward IPOs even though they had never made a profit. It seems that similar things are happening again. Pandora, an internet radio company has put forward an IPO even though it has never made a profit and the CEO of the company has said he has no plan or time line for when the company will make a profit. Linkedin is similar to Pandora. It has not yet made a profit, but it put forward an IPO.

It seems that other companies that are going to be offering IPOs are in similar positions. They either have not made a profit, are losing members, or it is not clear that the companies will be around in a few years. So, does anyone think we are in the middle of or at the beginning of a technology stock bubble?

[notesdev]

1. Just take a look at the revenue models for these companies

That will answer your question. If you were watching a decade ago this should all be very familiar.

[Old and In the Way]

3. IIRC, Yahoo was selling for 800X earning before the correction..

A lot of these social networks are in the same class....valuation seems to be based on eyes, not actual revenue stream.

[girl gone mad]

2. LNKD is well below its IPO price now..

but, yes, Wall Street is doing its best to lure new suckers in by leveraging the hype surrounding social media/Facebook. One way they do this is to create an artificial shortage of shares so that these new offerings get a big ramp up on the first day of trading. It's a scam.

[SoCalDem]

4. Rich folks have a LOT of stockpiled money, & they love to gamble

nothing new..

when this bubble pops in a while, taxpayers will dig deep again & bail everyone out.. rinse-repeat

[Xithras]

5. There are some fundamental differences this time around.

I worked at several dotcoms in the 90's, and it wasn't simply the lack of profit that killed them, but the lack of interest in EVER being profitable. It was the "new economy" and it wouldn't be "bound by archaic business structures". Discussions about things like profit were taboo.

Pandora has a revenue model, even though it's very young and its longevity remains to be seen. I pay $36 a year for my Pandora One subscription, which eliminates ads, gives me higher audio quality, lets me skip more, etc. It works pretty well for them too, as they did $90 million in sales during the first quarter of 2011 alone, while their "loss" was only about $300,000.

Facebook and others have revenue models that are either showing climbing profitability, or at least decreasing losses. It's rare to see a tech company nowadays that doesn't have some sort of workable revenue model. Back in the 1990's, investors would throw money at anyone with an interesting idea, with the goal of shoving them to IPO as quickly as possible. Nowadays "What's your revenue plan" is the first question that Angels ask.

By the way, LinkedIn had $161 million in total revenue last year, with $1.85 million in profit. It's not much, but it's still a young company with high expenses...and it's NOT a loss.

[Johonny]

7. I agree

price to earnings of many of these new tech companies not similar to the dot com era bubble.

[cbdo2007]

6. yes and no

there is definitely an internet IPO stock bubble but there are many tech companies out there that are doing poorly such as Cisco and HP, even Microsoft and Apple have slowed down and seem to be in a slump separate from the rest of the market.

It's hard to see what the results of this will be. I don't think we're looking at a crash in the next 10 years or so, but definitely internet stocks are probably going to reach a max level and start tapering off or pulling back.

We'll see!