After a nice upward move on the day of the Fed rate hike, the market retreated sharply in three subsequent sessions. The sell-off is pretty much done, according to Redpoint Ventures.
The Fall: Between Wednesday and Monday, the SPDR S&P 500 ETF Trust SPY has lost more than 7%. The weakness is even more acute when we consider the all-time high reached late last year. Since hitting a high of 473.54, SPY has stopped at approximately 16%.
Future ‘Tense’ For The Market: The market may have dropped “somewhat” more despite falling software stocks from their recent high, venture capitalist Tomasz Tunguz says in his weekly newsletter.
Back in 2017, the most expensive stock was Veeva Systems, Inc. VEEV and then it trades 11.7 times forward multiple, he said.
Cloudflare, Inc. NET currently has the highest appreciation at 22.2 times, he said. If the appreciation environment reflects the situation, Cloudflare could see the multiple halves again, he added.
A typical company traded 5.4 times in bulk in 2017 compared to 7.93 times currently, Tunguz said.
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The Fastest Grower Could Be Worst Hit: Tunguz said the total basket of software stocks was in the same multiple as in 2017. Some of them like ServiceNow, Inc. NOW at Five9, Inc. FIVN rose, while Wix.com Ltd. WIX, New Relic, Inc. BAGO at 2U, Inc. TWO fell, he added.
“High flyers have raised distribution at the upper end of the market,” says the author of “Winning with Data”.
If the multiples compress further, the top quartile – the fastest growers – will carry the weight, he warns.
“The market can continue to have a stock and never reach zero,” Tunguz said.
SPY closed the session Monday down 3.20% to $ 398.17, according to BenzingaPro data.
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