According to the WSJ, fewer than 20% of technology companies recently going public are profitable, the lowest level since the dot-com bubble in the early 2000’s. While that’s clearly a worrisome sign, it’s also clear that investors don’t seem to care right now, given the premium the market is currently putting on growth. In a lower growth environment, companies that grow revenues in any climate are usually handsomely rewarded (look no further than the FAANG stocks – Facebook, Apple, Amazon, Netflix and Google, which are once again leading the market’s ascent).
The problem for investors, of course, is that the market’s appetite for risk can change quickly (as we saw in the fourth-quarter last year), which could bring these early-stage technology firms back down to earth. But for now, as the article points out, in a market known for “short-termism”, investors are more than happy to wait it out for the longer-term story to emerge.