Last week's pull back in US technology stocks has so far resulted in a 7% drop in the NASDAQ Index, but only a 2% drop in the S&P 500, and really hasn't had any impact on the ASX 200 index, which is flat over the same period. The fall in the NASDAQ has seen some of America's biggest and best technology stocks suffer. Google Inc (NASDAQ: GOOGL) and Amazon.com Inc (NASDAQ: AMZN) have plunged over 10% since mid-March over concerns surrounding their valuation.
Australian tech stocks
Many of Australia's big tech names have also been harshly dealt with after strong share price gains. Are these 10 big names now looking cheap?
Accounting software firm XERO FPO NZ (ASX: XRO) has fallen 30% over the last month after rising over 500% in a year.
Foreign exchange company Ozforex Group Ltd (ASX: OFX) is down over 13% after rising sharply following its IPO last year.
Outsourcing website Freelancer Ltd (ASX: FLN) has fluctuated wildly since its listing in November 2013 and has plunged over 25% in the last month as investors grow weary of its lofty valuation.
Well-known website owners REA Group Limited (ASX: REA), Carsales.com Limited (ASX: CRZ) and SEEK Limited (ASX: SEK) have also been punished by between 6% and 10% as sky-high price-to-earnings valuations saw investors lock in profits from previous months.
Similarly, telecom groups iiNet Limited (ASX: IIN), M2 Group Ltd (ASX: MTU) and TPG Telecom Ltd (ASX: TPM) are all off around 10% from their recent highs as there has been some concern over the ability of these groups to meaningfully grow revenue in the mature Australian market.
It's not all bad though, mature software development companies, such as SMS Management and Technology Limited (ASX: SMX), have managed to avoid the pullback and deliver similar or better returns than the ASX 200.
Foolish takeaway
Investors should be wary of companies with sky-high valuations as pullbacks such as those seen last week are always a possibility. Some quality companies, such as REA Group and SEEK appear to be truly deserving of the valuations and will likely recover quickly based on their forecast growth and profitability, while others may remain subdued until they can demonstrate reliable shareholder returns.
