Here’s why the Nearmap share price is plunging lower today

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The Nearmap (ASX:NEA) share price has tumbled 16 cents or 9.95 per cent lower to $1.45 as high flying ASX tech stocks are following Wall Street lower.

Rising US interest rates is sending shivers through the stock market as higher interest rates slow economic growth and by comparison, can also make bonds and term deposits look more attractive than shares.

In Thursday afternoon trade, the ASX 200 index has plunged 144 points or 2.4 per cent to 5,905. Though there was no major news out on Nearmap shares, that pressure in the broader share market was enough to push its shares sharply lower.

So what?

Nearmap shares had run up above $1.90 following last month’s $70 million capital raise.

The top performing fund manager Pie Funds had said it expects FY19 to be a watershed for Nearmap as the aerial imagery company moves through cashflow break even and the significant operating leverage in the business becomes apparent.

As with many high flying ASX tech stocks, Nearmap shares are not cheap.

A recent article in the AFR said Nearmap is currently forecast to make a profit in 2020 which would give Nearmap shares a price to earnings multiple of 171, an “astronomical” valuation.

Now what?

Nearmap shares are not for the faint hearted. From its September high of $1.94, the Nearmap share price has plunged 25 per cent to the $1.45 it trades at today.

Because of its extreme valuation, any investment in Nearmap should be looked at over a period of years, not days.

If Pie Funds is right, and FY19 is a watershed year for Nearmap shares, when looked at over the long-term, these panic induced share price wobbles will be nothing more than bumps in the road.

Nearmap shares don’t look cheap, but these 3 shares do…

Combining countless hours of research with over 30 years of hands-on stock market investing experience, The Capital Club’s founder Bruce Jackson has just published his definitive list of 3 Cheap and Good ASX Stocks for 2018.

Nearmap was not one of them, but the list does include one tiny gold mining stock, and the company one top fund manager calls the cheapest stock in the ASX 100.

Find out why these 3 Cheap and Good Stocks could be better buys than Nearmap. But you better hurry… these stocks may not stay cheap for long.

See the 3 stocks

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Contributors to this article may own shares in some of the companies mentioned in this article. The Capital Club has a thorough disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.
Bruce Jackson has 30 years of hands on investing experience. He is passionate about stock market investing, running his own portfolio and SMSF. His focus is on small cap growth stocks. You can contact Bruce at brucej@thecapitalclub.com.au