This week, Zacks Managing Director and Equity Strategist Tim Nyland, CFA, discusses:

• Mega cap tech stocks outperformed the S&P500 and QQQ by 2x in April—so why are PE F12M valuations for mega cap tech in relative decline (in fact, at a more than 9-year low compared to S&P 500 and QQQ)?

• Tim analyzes the drivers behind this declining valuation trend, including a deep dive into estimate revisions, revealing the aggregate trend in EPS F12M that has now gone parabolic in 2021.

• Tim couples PE F12M to the EPS Growth Rate Estimate Mean to offer a PEG ratio analysis for Mega Cap Tech relative to S&P 500 and QQQ composites. Adjusting EPS growth rate estimates for 1 standard deviation, Tim's analysis shows that sell side analysts do NOT agree about the trajectory of S&P 500 EPS growth over the next 3-5 years when compared to mega cap tech.

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The views of Tim Nyland, CFA are not necessarily the views of Zacks Investment Research.

Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research is not a licensed securities dealer, broker or US investment adviser or investment bank. The S&P 500 is an unmanaged index.

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