US Big Tech good to buy now?
US Big Tech stocks have finally tumbled this year and some investors are thinking if they have came down enough to make good investments.
We will attempt to answer this but it remains an opinion and not to be taken as a financial advice.
Firstly, it isn't easy to compare them - even though they are classified as Big Tech, their businesses are different.
Out of which, only Alphabet and Meta are more similar to each other as they derived majority of the revenue from ads.
Amazon is mainly e-commerce and cloud. Apple is mostly hardware sales and Microsoft is enterprise softwares.
As such, it is misleading if we just compare financial ratios across the board.
But we can compare Alphabet and Meta first, in terms of PE ratio
Alphabet 16x
Meta 8x
Meta is clearly the cheaper one but it isn't without reason. We all know about Meta's big bet on the metaverse costs a lot of capital and it adds a big uncertainty to its future.
Also, Meta has not resolved the tracking issues on iOS devices as well as facing off with TikTok's rise.
On the other hand, Alphabet didn't have serious issues like Meta. Moreover, Alphabet's ad revenue is more than double Meta's.
Alphabet search ads is still going strong albeit seeing some headwinds lately. But this is just the natural ebb and flow of the economy which affects every company.
Alphabet has its Android OS and is less vulnerable than Meta who doesn't own any operating system. So Alphabet can technically squeeze Meta out of tracking its users just like how Apple did.
Google Cloud has been a big investment for Alphabet but it is a bet that is working so far. It has become the third largest cloud provider in the world. Just that it is not profitable yet.
Alphabet's 10y average PE was at 30x. So at 16x it is considered relatively cheap.
Alphabet looks like a safer bet than Meta. But of course, if Meta's issues get sorted out, the gains could be much bigger than investing in Alphabet.