Dot-com mega caps traded at a higher valuation than today’s mega caps – GS

Today’s mega caps have a lower P/E than they did during the Dot-com era, according to a Global Investment Research report by Goldman Sachs analysts.

The top large-cap stocks account for 60% of the S&P 500 (SP500) return year-to-date. Goldman Sachs analysts have a year-end target of 5,600. However, the valuation of the largest stocks today is below that of the Dot-com peak.

The 10 largest stocks today — (MSFT), (NVDA), (AAPL), (AMZN), (META), (GOOGL), (GOOG), (AVGO), (BRK.B), (LLY) — trade at price-over-earnings of 30x, compared to 47x at the peak of the Dot-com bubble in 2000, which included Microsoft (MSFT), Cisco (CSCO), Intel (INTC), Oracle Systems (ORCL), and IBM (IBM).

The current relative valuation of the 10 largest stocks vs. the rest of the S&P 500 (SP500) is -95 basis points today. It was -431 basis points in 2000.

According to the analysis, the “failure to meet lofty growth expectations ended the Dot-com valuation boom.”

The sales CAGR as of January 2000, during 1999-2001, for Cisco (CSCO) was 28% but realized 11%; for Microsoft Corp. (MSFT) was 16% but realized 10%; and for Intel (INTC) was 17% but realized -5%.