Some Big Tech Stocks Are Still Expensive, But This Analyst Says They're Worth It. Here's Why

Despite a recent downturn in the stock market, major U.S. tech companies like NVIDIA Corporation NVDA, Apple Inc AAPL, Tesla Inc TSLA and more remain expensive compared to historical price-to-earnings ratios. But that is not deterring some analysts from having a bullish outlook on the big-tech industry.
Nick Colas, co-founder of Datatrek Research, says that although valuations remain elevated across tech stocks, big tech companies are still “best-in class.” Colas laid out a formula that he uses to track valuations of U.S. companies in a recent report.
Instead of looking at traditional PE ratios, Colas takes a company’s estimated EPS and multiplies it by 10 to get an estimate of what a share would be worth. Then he compares that to the current share price of the company, to see how much of share price comes from expectations for future growth.
Colas argues that, because tech stocks share prices are higher from expectations of future growth, that is a sign of strong investor confidence which should result in growth over time. 

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“Put simply, the market expects these companies’ earnings to well more than double over time,” Colas said. 

Tech stocks have gotten crushed throughout the last week, with the Invesco QQQ Trust QQQ down more than 4% from its recent highs on Tuesday. Amazon.com Inc AMZN reported a strong earnings report after the close, but the QQQs will still likely trade down more than 2% on the week. 

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