Despite the sell-off, valuations say it's still too soon for bargain hunters.
It's no secret that technology stocks have had a bad few weeks: The tech-heavy Nasdaq Composite Index has slid more than 7 percent since March 5. The slide has investors wondering if there's more to come, or whether it's time to go bargain-hunting for tech stocks.
Despite the recent sell-off, our analysis shows that all of the technology subsectors that we track are still well above historical averages. The highest flier is the Dow Jones Internet Index, which is tracked by the First Trust Dow Jones Internet ETF (FDN | A-97): The index currently sports a P/E near 75—well above its four-year average of 41.
The software subsector also looks pricey relative to its historical average. Our proxy for the software subsector here is the S&P North American Technology-Software Index, which is tracked by the iShares North American Tech-Software ETF (IGV | A-30). IGV holds positions in the biggest players in the software industry, including Oracle, Intuit and Symantec.
Valuations for the communications and semiconductors subsectors are still elevated, but much closer to their historical averages. For example, the S&P North American Technology-Multimedia Networking Index, which is tracked by the iShares North American Tech-Multimedia Networking ETF (IGN | A-45), has a much smaller disparity between its current valuation and its historical average.
Similarly, the PHLX Semiconductor Sector Index and the Dow Jones US Technology Index are both within 15 percent of their average historical valuation. Those indices are tracked by the iShares PHLX Semiconductor ETF (SOXX | A-71) and the iShares U.S. Technology ETF (IYW | A-91), respectively.