Reality suddenly mucks up the rosy scenario.
Many of our heroic “story stocks” are getting totally destroyed. Yet not much has changed: Their business model, if any, is the same; they’re still losing money hand over fist; and they’re still trotting out the same custom-designed metrics that seduced analysts and the media once upon a time. But it’s not working anymore.
After the drubbing on Wednesday – the Nasdaq plunged 3.4% and is down 13.5% from its high – we know one thing for sure: there will be a rally someday that lasts longer than a few hours. But something big has changed.
There was the old guard of new tech. Netflix plummeted 8.6% on Wednesday and is down about 20% from its 52-week high. Apple dropped 2.6% and is down 28% from its 52-week high. Facebook lost 3.9% and is 14% off its 52-week high. The list goes on.
But the real drubbing was reserved for the new darlings, the fruits of the recent IPO boom, and other “story stocks”:
Etsy dropped 4.9% for the day to a new low of $6.99. After its IPO at $16 in April last year, it spiked to $35.74 and has gotten whacked down 80% since. Twitter plunged 4.8% to a new low of $18.68. After its IPO at $26, it spiked to $78, from which it has now plunged 76%. Shopify plunged 10% during the day and is down 48% from its high in June.
Mobileye, which makes software for camera-based systems and sensors for (self-driving) cars, plunged 10.3% for the day, and 47% from its 52 week high. And yet, self-driving car tech is one of the hottest, most hyped wonders of the day.
Oh, and GoPro! In after-hours trading, shares plunged 25% to $11 a share. But it’s an exception among our IPO heroes: it has actual profits and a real P/E ratio! And it has a real business model, even if it resembles a one-trick pony that’s getting tired.
…click on the above link to read the rest of the article…
