- Tech valuations have “hit a wall” after recent earnings, Jefferies analyst Brent Thill wrote in a Monday note.
- That means that in the near term, investors should be patient and “take a mini time out,” according to the note.
- Still, fundamentals in the sector remain strong, and will drive growth going forward, Thill said.
- Read more on Business Insider.
The recent rally in technology stocks has paused after surging for months, suggesting that investors in the sector might see limited gains in the near term, according to Jefferies analyst Brent Thill.
“Tech valuations have hit a wall this week as evidenced by the negative reaction to last week’s earnings,” Thill wrote in a Monday note. “Multiples are already high and the next leg of growth for this space has to be driven by fundamental performance,” he said.
The pullback in shares of major tech companies was a reversal from the sector’s recent performance – since the start of the coronavirus pandemic, multiples for companies associated with the work-from-home trade have expanded by 28%, according to the note.
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In the near-term, “investors will need to be patient” given elevated expectations for technology companies and might want to,”take a mini time out,” Thill wrote. But, there’s still hope for the sector going forward – “based on our expert checks, fundamentals within the space remain sound,” said Thill.