While many speculative Robinhood favorites are down sharply over the last couple of weeks, they're still often well above where they traded two or three months ago, and arguably remain quite overvalued on the whole.
For example, while fuel cell plays Plug Power (PLUG) , FuelCell Energy (FCEL) and Ballard Power (BLDP) are now down 40%, 44% and 32%, respectively, from recently-set highs, they're still 67%, 92% and 33% from where they closed three months ago. And they each still sport forward sales multiples north of 40.
Likewise, 3D printing plays 3D Systems (DDD) , Stratasys (SSYS) and ExOne (XONE) remain up 357%, 147% and 215%, respectively, over the last three months. EV plays QuantumScape (QS) and Luminar Technologies (LAZR) are up 150% and 123%, respectively, over the last three months and still sport sky-high valuations -- QuantumScape, which doesn't expect to see its solid-state battery enter production until 2024, is still worth $20 billion. And soon-to-merge cannabis plays Tilray (TLRY) and Aphria (APHA) are up 252% and 171%, respectively, and maintain double-digit forward sales multiples.
In a nutshell, valuations are still generally stretched for some companies, and some investors still have large paper profits that they could turn into real profits if the current selling unnerves them. In addition, judging by the spike seen in margin debt balances over the last few months, many newer investors in these companies could be forced to unload their positions due to margin calls if the selling continues.
Also, as others have pointed out, ARK Invest's trading activity could go from being a tailwind for various high-multiple tech stocks to a headwind. In recent months, giant retail investor inflows for the ARK Innovation ETF (ARKK) and other ARK funds have contributed to the huge rallies seen in various clean energy, 3D printing, software/cloud and biotech names that ARK has been partial to. Conversely, though, major outflows for ARK funds could make the selling pressure in such names during a selloff stronger than it otherwise would be.
With all that said, I'm not sold at this point on the current selloff being the start of a bear market for tech stocks overall.
In spite of the speculative frenzy in some corners of tech, quite a few quality tech names remain moderately-valued or just a little expensive right now. And between vaccine rollouts, elevated household savings levels and the likely arrival of additional stimulus in March, the macro backdrop still looks favorable, though it's possible that some stay-at-home plays see demand cool off a bit in the coming months.
Eventually, inflation, higher bond yields and a tightening Fed could become a problem for tech stocks in general. But we still appear to be a ways away from reaching that point, and for now, the Fed remains as accommodative as ever.
As a result, if the current tech rout continues and leads both very expensive and not-so-expensive companies to see more selling pressure, the risk/reward could start looking very good for some of the more reasonably-priced names.