That's the part where the market has kicked into bubble valuation territory, when you're primarily seeing multiple expansion driving 40% or 100% type gains.
Microsoft hasn't been able to grow earnings for years. Why do they have a 30 style PE ratio? Why did their stock triple on zero earnings growth? Comparing their growth today versus the multiple, against 2000's valuation, today's value proposition is drastically worse. Or spread it out, compare 1995-2000 MSFT growth, with the multiple they had at the end of that five years, versus 2012-2017 growth and the multiple they have now.
As for Microsoft specifically, it's run largely coincided with Satya Nadella succeeding the largely lackluster Baller. Coincidence?
And Azure is doing pretty well too - it's a 3 horse race with AWS and Google, and there does not necessarily have to be a single long term winner.
> Microsoft was sporting a ~50-65 PE ratio in 1999/2000.
Today's PEs:
As you say there are some outliers too: Now I went through a list of the largest tech companies to produce the above list. What this seems to show is that the sector as a whole isn't overvaluaed, at least in terms of earnings.As for the outliers, they're all pretty much examples of large bets on the future of the various companies:
- Nvidia seems to be well placed for GPU driven ML
- Tesla is a bet on battery tech and self-driving cars
- Netflix is a bet on Netflix dominated global on-demand entertainment and distribution (they're now in all but 4 countries)
- Amazon is of course a bet on owning the online retail sector
Like any bet some will pay off and some won't.
> This list only keeps going.
See now that's a bit of a stretch.