No Internet Bubble….Yet

Posted by By Bryan at 27 July, at 18 : 04 PM Print

Yes, it sounds like we are back in 1999 yet again. Internet companies that are huge are growing and growing and they are taking advantage of this massive growth. More and more companies are going public. While that should be a good sign for the economy and that things are slowly starting to get better, there is a huge problem with these companies.

Most of them are hemorrhaging money! Again! Didn’t we go through this overvaluation just 12 years ago, when almost every Internet company made millions and millions despite the company never making a single dime?

While it is good to remember the bubble times of the Internet age, this is far from that time. Then, every site in the world was going public and cashing in and they were cashing in big time. That is not the case now, even though the Internet giants all seem to be cashing in at the same time. And the next big one to go public in early 2012 is rumored to be Facebook. That is the one to watch for, as it will be getting valuations over $100 billion, though it never turned a profit of anywhere close to $1 billion yet.

But tech stocks are actually at their lowest in nine years, meaning that if there is an Internet bubble, it is far, far away. There is no way it is happening anytime soon.

However, the IPOs this year are staggering. Out of the 74 so far this year, 28 of those have been from the technology industry. And half the year is over. That means that the other 31 IPOs that are expected to take place before this year is over in the tech industry is likely to happen.

It is doubtful that we will really see another Internet boom like we did back in 1999-2000. Back then, the Internet was new and people did not fully understand how to value companies. Investors looked at projections that were far fetched and they bought into them. But Internet use back then is nowhere like it is now. In fact, 2 billion people worldwide now have access to the Internet. That is over a third of the world that is now connected online, which is a huge market. That is more then 8 times the amount that was online back in 2000.

It just goes to show you how much the market has grown and that the stocks of these tech companies are actually priced within reason, especially compared to the 2000 prices that these companies were getting.

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