FPT's headquarters in Cầu Giấy District, Hà Nội. FPT is collaborating with Nvidia to build a US$200 million AI factory and provide a cloud computing platform for AI research and development, including the potential production of GPU graphics chips. — Photo courtesy of FPT
Technology and telecommunications stocks have witnessed remarkable growth since the beginning of 2024, while maintaining high price-to-earnings (P/E) valuations.
Stock prices of FPT Joint Stock Company (FPT) and CMC Technology Group Joint Stock Company (CMG) have been particularly notable, continuously reaching new highs, while those of Elcom Technology Communications Corporation (ELC) and Viettel Construction Joint Stock Corporation (CTR) have experienced increases of 30-40 per cent.
FPT and CMG have established a strategic partnership with US Nvidia Corporation to advance research and development in artificial intelligence (AI) and position Việt Nam as a regional AI centre.
FPT is collaborating with Nvidia to build a US$200 million AI factory and provide a cloud computing platform for AI research and development, including the potential production of GPU graphics chips. CMG plans to expand the Tân Thuận Data Centre, invest in AI Cloud infrastructure, and acquire 1,000 Nvidia GH 200 GPUs worth $250 million to develop interactive technology products.
Besides the promising growth, some technology stocks have high price-to-earnings (P/E) valuations. FPT's P/E ratio is over 25 times, CMG's is over 34 times, and CTR and ELC are around 30 times, compared to the market average of approximately 14 times.
The Agribank Securities Joint Stock Company (Agriseco) acknowledges FPT's sustainable growth potential through its collaboration with Nvidia and M&A strategy in foreign markets. However, considering the current high stock price, Agriseco recommends monitoring FPT shares and waiting for a more attractive price range.
Other securities companies such as ACB Securities JSC and Yuanta Việt Nam hold a positive medium to long-term outlook for FPT shares, with target prices higher than the current level.
Regarding CTR shares of Viettel Construction Joint Stock Corporation, Mirae Asset Việt Nam maintains a positive assessment of the company's development in various business segments, particularly in telecommunications infrastructure leasing.
SSI Securities Company has a 'neutral' view on CTR shares, considering that the price has already reached the target.
According to SSI, Viettel Construction, a subsidiary of the Telecommunications Group, may require significant capital investments for Base Transceiver Stations (BTS) once its parent company successfully auctions the right to use the 5G band in March 2024. Despite this, the company has decided to pay a cash dividend of 27.2 per cent in 2023, higher than the 10 per cent dividend paid during the period of 2016-2021 (with 2022 at 29.19 per cent).
Regarding valuation, Nguyễn Thế Minh, director of Research and Development for Individual Customers at Yuanta Việt Nam, stated that the market lacks a suitable tool to value technology stocks.
In the current stock market, the P/E valuations of many other stocks are also at high levels. Therefore, the current market price of technology stocks cannot be considered expensive.
Instead of solely relying on the current P/E valuation, investors should focus on the future story and growth potential of the business. If the US Federal Reserve lowers interest rates, it could serve as an important driving force for the continued growth of domestic and foreign technology companies. — VNS