With the US-technology heavy NASDAQ Composite (INDEXNASDAQ:.IXIC) dropping around 4% in the past three months, most investors are aware that the headlines and commentators are concerned that a serious correction is brewing for highly priced tech stocks.
The NASDAQ jitters have filtered through to the major US indices and of course the local bourse hasn't been immune either. In fact a handful of Australian-based high flying tech stocks have been hit pretty hard too.
Software firm Moko Social Media Ltd (ASX: MKB) has been experiencing early success at rolling out its social media platform to US colleges. However that hasn't stopped its share price plunging 41% in the past three months.
Mint Wireless Limited (ASX: MNW) which has developed a device for providing mobile payment solutions has witnessed a 24% drop in its share price. The mobile payment space is exciting – given its growth potential – however it is also quickly becoming crowded with everyone from banks such as Commonwealth Bank of Australia (ASX: CBA) to the co-founder of Twitter Inc (NYSE: TWTR), Mr Jack Dorsey, via his company Square looking to provide payment solutions in the Australian market place.
The cloud-based accounting software success story XERO FPO NZ (ASX: XRO) has also had the wind knocked out of its sails in the past three months with its share price falling 27% from over $40 to around $27. Over six and 12 month periods however, Xero's share price is still riding high and given the speed it is adding customers it's easy to see why investors are enamoured with the stock and why competitors such as Reckon Limited (ASX: RKN) would be taking the threat of this new entrant very seriously.
Foolish takeaway
It is never easy to predict the outcome for firms that are yet to be profitable, however at the right price the risk-reward trade-off can make an investment in tech stocks very appealing. In the past few months, very little has changed in terms of the business operations for these three companies. What has changed is the price you can buy them at. The risk-reward trade-off appears to have moved in investors' favour.
