Sure, the past year has been volatile for most stocks, especially in the tech sector. But even amidst the market turmoil, some tech companies still boast eye-wateringly high share prices upwards of $2,000 per share.
These stocks have maintained their steep valuations through strong execution operationally along with secular growth trends that Wall Street expects to persist over the coming years. But their triple and quadruple digit share prices put them out of reach for many retail investors.
In this article, we‘ll analyze today‘s highest priced tech stocks, discuss the key factors driving their valuations, and provide context on their growth trajectories and risks. Let‘s dive in.
What Makes a Stock "Expensive"?
Simply put, an expensive stock is one with a share price that is high relative to its earnings per share and overall profitability. The most commonly used valuation metric – the price/earnings (P/E) ratio – quantifies this relationship.
But a high nominal share price alone doesn‘t necessarily mean a stock is overvalued. Other factors like earnings growth, market positioning, and addressable market size also determine valuations.
Many of today‘s priciest tech stocks have avoided splitting their stock to keep individual share prices above $500, $1,000 or even $2,000. They‘ve maintained these high figures through rapid growth that Wall Street expects to continue.
However, such lofty stock prices present obstacles for retail investors since buying single shares becomes unrealistic. Buying even one share of say Booking Holdings with its $2,100 share price requires significant capital.
That‘s why even some iconic stocks like Amazon, Tesla and Alphabet (Google) have split their shares in recent years despite strong operating performance.
Recent Tech Stock Splits
In fact, Amazon (20-to-1 split) and Alphabet (20-to-1) both underwent splits in 2022 to make their shares more accessible. This came after years of their stocks price climbing well past $2,000 per share.
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Prior to its split, Amazon traded at $2,100 per share with expectations that it would reach $5,000. Post-split, Amazon now trades around $85.
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Meanwhile, Alphabet shares exceeded $2,750 in the months before announcing its split. With 4-to-1 split shares now around $90.
The key takeaway is that while these companies perform exceptionally well fundamentally, complications arise when shares reach very high valuations. Stock splits help continue broad ownership.
With that overview of stock splits, let‘s look at today‘s priciest tech stocks that haven‘t yet split their shares.
Booking Holdings ($2,106) – The Most Expensive Tech Stock
Booking Holdings, formerly known as Priceline, operates leading online travel brands including Booking.com, Priceline.com, and Kayak. The Connecticut-based company allows customers to easily compare rates and book flights, hotels, rental cars, and more from providers globally.
In the third quarter of 2022, Booking Holdings generated over $6 billion in revenue and $1.8 billion in net income. Compared to pre-pandemic levels, Booking has made an impressive recovery with revenue up 58% from two years ago.
With travel demand surging back faster than expected, analysts anticipate growth rebounding to 16% annually over the next five years. With strong profits already and operating leverage still to come as marketing spend moderates, Booking‘s earnings could approach $130 per share by 2025.
Hence even at $2,100 per share currently, Booking trades at a comparatively moderate-looking forward P/E of 16x. If global travel growth plays out as hoped over the next decade, the stock likely marches higher to new records.
ASML ($569) – Semiconductor Manufacturing Leader
Based in the Netherlands, ASML manufactures advanced equipment used to produce computer chips and integrated circuits. The company‘s extreme ultraviolet (EUV) lithography systems help drive enhanced precision and performance in manufacturing bleeding-edge semiconductors at foundries like TSMC and Intel.
ASML operates a near-duopoly with its EUV systems that power the production of leading-edge chips down to 3 nanometers and perhaps someday soon to 2 nm and beyond. Almost all advanced semiconductors today pass through ASML‘s EUV tools.
The firm produces strong financial results with annual revenue nearing $22 billion as of last year. With the continued exponential growth in semiconductors across virtually all industries, ASML anticipates around 11% average annual growth ahead.
Its operating margins also top 30% with further upside potential. That generates considerable earnings and cash flows which support ongoing R&D investments to maintain ASML‘s competitive edge in lithography systems. Trading at 26x forward earnings amidst a temporary industry inventory correction, if chip production growth persists then ASML remains poised to capitalize over the long-run.
Broadcom ($559) – Acquisitive Semiconductor Giant
Broadcom ranks among the world‘s largest semiconductor makers following an acquisition fueled growth strategy over the past decade. The company sells a diverse range of chips and components enabling wired and wireless communications, networking infrastructure, cloud infrastructure, 5G mobility, broadband access, and more.
Originally a bold rollup devised by CEO Hock Tan who orchestrated the $5.5 billion merger between Avago Technologies and Broadcom, the company now boasts incredible scale.
Broadcom aggressively acquires complementary businesses both big and small across the semiconductor space. This includes the landmark purchases of Brocade Networks, CA Technologies, Symantec‘s Enterprise Security business, and most recently VMware for $61 billion.
This enormous scale translates into impressive financials. For fiscal 2021 ended October 29th, Broadcom generated $27.5 billion in revenue and nearly $10 billion in free cash flow. The upcoming inclusion of VMware will further boost Broadcom‘s Software segment to over 50% of revenue.
As long as demand for next-gen connectivity, infrastructure hardware and software remains resilient, Broadcom appears poised to continue outpacing growth in global IT spending. With Tan at the helm to steer more strategic M&A when opportunities arise, investors appear bullish on Broadcom‘s path higher.
Roper Technologies ($438) – Niche Industrial Technology Leader
Roper Technologies operates a portfolio of niche software and industrial technology businesses serving a diverse set of end markets like healthcare, transportation, food, and more. This includes market-leading solutions for pumps and metering equipment, radio frequency products, fuel dispensing, data analytics and more.
The firm focuses intently on software-enabled instrumentation and industrial solutions that provide mission-critical functions for customers across industries. This clear strategic positioning supports industry-leading margins with double-digit profitability alongside mid-single digit organic revenue growth.
Backed by strong recurring revenues from installed bases and multi-year contracts, Roper produces excellent cash flows. This fuels ongoing R&D plus further acquisitions to complement existing businesses as the company expands globally.
For the last twelve reported months ending September 30th, 2022, Roper delivered $5.8 billion in revenues, $1.5 billion in operating income, $861 million in net income, and $1.1 billion in operating cash flows. Trading at 28x forward earnings, investors appear confident in management‘s ability to continue executing.
Lam Research ($419) – Semiconductor Manufacturing Equipment Leader
Lam Research develops innovative wafer fabrication equipment and services that enable semiconductor manufacturers to build smaller, faster, and more powerful devices.
The company‘s thin film deposition, plasma etch, photoresist strip and wafer cleaning solutions help chipmakers cost-effectively manufacture advanced logic and memory chips. Lam‘s customer base includes leading foundries like TSMC and Samsung along with memory suppliers SK Hynix and Micron.
Bolstered by multiyear technology roadmaps from those major chip manufacturers, Lam can align its R&D pipeline accordingly. With expertise honed over nearly 40 years in semiconductor equipment, Lam Research gives chipmakers essential capabilities to progress Moore‘s Law.
For the fiscal year ended June 26, 2022, Lam delivered over $17 billion in total revenue. As silicon content growth persists across autos, AI, 5G, data centers, IoT and countless electronics globally, semiconductor equipment suppliers like Lam and ASML previously highlighted remain positioned to benefit.
Trading at just 14x forward earnings amidst the current inventory correction, Wall Street expects Lam along with the broader semiconductor space to bounce back strongly within a couple years.
ServiceNow ($391) – Cloud Services Leader
ServiceNow operates a cloud computing platform delivering digital workflows to enable enterprise IT service management (ITSM). The firm essentially consolidates various software tools and automates a range of administrative functions for managing issues, changes, requests and more.
The Now Platform enhances visibility and reduces headaches for IT departments through greater centralization. ServiceNow counts roughly 80% of the Fortune 500 among its customer base.
Bolstered by the resilience of cloud spending through difficult economic environments, ServiceNow continues posting impressive growth. The firm‘s Q3 2022 revenue of $1.83 billion rose 21% annually while subscription revenues grew 22%. Roughly 98% of ServiceNow‘s sales stem from recurring subscriptions, providing excellent revenue visibility amidst macro uncertainty.
With capabilities extending across IT, employee workflows, security and customer service management, ServiceNow aims to streamline additional areas of enterprise functions going forward. Trading at nearly 9x 2023 projected sales, investors clearly expect many more years of solid growth ahead from this cloud native leader.
Intuit ($390) – Financial Software Giant
Known for Quicken, TurboTax and QuickBooks, Intuit produces the vital financial software infrastructure relied on by individuals and small businesses worldwide. The growth run for Intuit stock has come amidst strong execution migrating desktop software to the cloud alongside new product introduction.
QuickBooks online now services over 5.2 million subscribers on its small business accounting and financial management platform. Meanwhile TurboTax Online counted nearly 39 million returns last tax season, capturing a dominant 67% market share of self-prepared filings.
Intuit is now expanding into new offerings like Credit Karma for consumer finance insights and Mailchimp for small business marketing. These should supplement the core TurboTax and QuickBooks franchises nicely as Intuit diversifies.
For the full-year fiscal 2022 ended July 31st, Intuit posted:
- $12.7 billion in total revenue, rising 32%
- $2.1 billion in operating income, rising 20%
- $2.7 billion in free cash flow, up 22%
Robust profits and cash generation empower Intuit‘s growth investments across products and geographies. Trading at nearly 10x forward sales estimates, Wall Street seems confident on durable growth ahead.
KLA Corporation ($377) – Semiconductor Process Control Leader
As a leading producer of process control and yield management solutions for the semiconductor and related microelectronics industries, KLA‘s metrology technologies help chipmakers enhance efficiency and repeatability. This includes delivering comprehensive data analytics, automation, inspection and measurement innovations spanning chip design, manufacturing, packaging and final test.
KLA‘s solutions provide the measurement sensitivity, precision and speed essential for chipmakers manufacturing at leading-edge nodes down to 3nm, 2nm and someday 1nm processes. With expertise refined over 40+ years in semiconductor equipment, KLA‘s installed base includes all major silicon manufacturers.
For fiscal 2022 ended June 30th, KLA generated $9.2 billion in total revenues while earning $3.8 billion in net income with $3 billion returned to shareholders via dividends and buybacks. Though the stock trades at nearly 17x forward earnings amidst temporary semiconductor inventory corrections, Wall Street sees KLA‘s long-term outlook brightly.
Adobe ($340) – Software & Creative Cloud Leader
Adobe sells critical software tools enhancing digital media creation, marketing optimization, analytics and e-commerce personalization. The company‘s creative cloud suite includes iconic apps like Photoshop, Illustrator and Premiere Pro used by creative professionals globally.
Additionally Adobe Experience Cloud and Document Cloud expand use cases, allowing knowledge workers to build immersive customer experiences across platforms while streamlining document management. With solutions spanning three key SaaS categories, Adobe counted a staggering 237,000 enterprise customers as of August 2022.
Transitioning fully to the cloud after initially building its legacy franchises on the desktop, Adobe‘s shift has propelled its growth trajectory to new heights. The company continues plowing nearly one-fifth of revenues back into R&D to sustain innovation across existing solutions while launching newer offerings.
In its fiscal 2022 ended December 2, 2022, Adobe generated $17.6 billion in revenue with 24% annual growth. Digital Media segment revenue grew 22% to $13.4 billion amid resilient demand for creative tools while Digital Experience segment revenue grew 26%.
Top line expansion combined with operating leverage has lifted Adobe‘s free cash flows nicely higher in recent years. Trading at nearly 8x forward sales amidst muted economic growth, investors still seem confident on Adobe executing through the macro storm clouds.
Synopsys ($318) – Semiconductor Design Automation Leader
Synopsys is a leading vendor of electronic design automation (EDA) software empowering semiconductor design and manufacturing. The company produces a range of software tools helping chipmakers design, validate, verify and manufacture complex integrated circuits while ensuring optimal quality.
Bolstered by deep chipmaker-manufacturer partnerships maturing over 30+ years alongside acquisitions of technology leaders like Avanti Computer Systems and Magma Design Automation, Synopsys dominates the EDA market. Its solutions allow engineers to overcome mounting complexity challenges and accelerate time-to-market for advanced ICs.
For the fiscal year 2022 ended October 31st, Synopsys generated $5.48 billion in revenue with $1.93 billion in net income and nearly $1.7 billion in operating cash flow. Its execution has translated into eight straight years of record financial results – quite a track record.
As next-gen chips require more sophisticated design automation solutions to manage rising complexity alongside tighter timelines, Synopsys appears well positioned to capitalize given its competitive strengths. Trading at nearly 8x forward sales, Wall Street sees plenty more upside potential ahead for this low-profile tech leader.
Key Takeaways on Expensive Tech Stocks
While nominal share price offers one useful datapoint on a given stock, investors should incorporate additional variables when evaluating companies trading at $250+, $500+ or even over $1,000 per share.
Metrics like P/E ratios, earnings growth, addressable markets and competitive positioning carry more weight. These help determine whether market valuations appear relatively high or low given financial performance and projected trajectories.
Many of today‘s priciest tech stocks boast either leadership positions in secular growth fields like cloud computing and travel tech (Booking Holdings) or mission-critical niches like semiconductor equipment (ASML, Lam Research) and design automation (Synopsys).
Their steep growth curves support multiples near the higher-end of historical ranges. However stocks trading at 20x+ earnings remain sensitive to execution missteps or changes in market sentiment.
On the other hand, strong operators like Broadcom and Roper Technologies that consistently meet targets through upturns and downturns seem less prone to material drawdowns. Their defensive characteristics offset somewhat richer seeming valuations.
Overall the tech sector faces intensifying economic pressures in 2023 amidst rising rates, stubborn inflation and enterprise spending cutbacks. Software and semis demand appears most vulnerable in coming quarters.
Yet for secular growers mentioned like Booking, ServiceNow and Adobe that facilitate digital transformation, transient slowdowns may present opportunities longer-term. Savvy investors can key an eye out for any sharp, unwarranted sell-offs this year.
So don‘t get spooked purely by triple and quadruple digit stock tickers – strong companies trade across a wide range of nominal share prices. Focus instead on growth drivers, financial performance and execution.
