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Soaring values of technology companies have dominated the market’s bull run, but now they are getting way too expensive as the earnings picture continues to deteriorate, a top tech analyst warned.
The tech sector is now trading at 21.4 times forward earnings, the highest level in 15 years, according to Toni Sacconaghi, AB Bernstein’s senior technology research analyst. This rapid multiple expansion, which is the most pronounced this year, has reached a worrisome degree given earnings are expected to have a “startling” decline over the next 12 months, the analyst said.
Source: AB Bernstein
“Risk is increasing in tech, especially with high priced stocks,” Sacconaghi said in a note Monday. “Part of tech’s challenge is that it is comping against a tough 2018. Tech’s earnings lagged the broader market last year, as tax reform more favorably impacted other sectors and expectations for 2020 don’t improve dramatically.”
Earnings for the tech sector are…