Great things doesn’t mean great stock

This article states that a lot of different technology companies are planning to go public following the success of Twitter’s IPO. The article leads to an interesting issue that I recall reading from a book by Warren Buffett: something along the lines of only buy a stock when you know how it functions and how it can make profit.

Personally, I use a lot of these technology brands, I tried using Box, Dropbox and Evernote myself and I think they are great tools that really make my life easier. However, great things don’t necessarily means a great stock. I recall learning something called the Price-Earning ratio in the COMM101 class on finance and it brings us right to the issue. As these technology stocks come into the market with a high price, how high will this ratio be if they still can’t figure out a way to earn large profit?  In a current state, I am not even confident that Facebook can live up to their expectation and start to earn more money as they rely largely on advertisement.

For Technology company, they need to start thinking about how can they make the profit in addition to creating great products.

Word Count: 200

Further readings

Buffett won’t invest in tech stocks 5th MAy 1998

Five reasons why this is the worst earning report Facebook has ever issued 1st May 2013


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