Today, WiseTech Global Ltd (ASX: WTC), Altium Ltd (ASX: ALU) and Appen Ltd (ASX: APX) shares were all trading down 3% or more.

For context, the ASX 200 (INDEXASX: XJO)(^AXJO) was 0.6% lower.

Leading the fall in the market today is the Information Technology sector, including the three companies mentioned above.

All three companies have seen huge gains since the beginning of the year, with WiseTech up 41%, Altium up 56% and Appen up 90% in just three months.

None of the companies has released any announcements to the market today. The most significant recent announcement was the completion of Appen’s acquisition of Figure Eight Inc two days ago. The acquisition is expected to significantly broaden Appen’s customer base and add recurring revenue to the business. This Rask Media article looks at the acquisition in more depth.

Why Are They Falling?

While all three companies have been market-darlings for the last three months, it is hard to say that they are fairly valued.

The P/E ratios range from around 60x for Appen to over 144x for WiseTech. Although all three have significant growth potential, it is difficult to justify the current prices, which is why a pull-back like the one today isn’t all that surprising.

Not All Tech Shares Are Falling

One Information Technology company that isn’t suffering today is Afterpay Touch Group Ltd (ASX: APT), up more than 3% to another all-time high.

Given that Afterpay is still making a loss, I find it even harder to justify its current share price. It may not be too long until we see a similar pull-back in its share price, but then again crazier things have happened. One Rask Media article recently questioned whether the share price could hit $30.

Summary

It’s not a good day for most of the ASX tech favourites, but Afterpay continues to defy expectations and, arguably, common sense.

It may be worth that price one day with its huge market potential, but I don’t think it’s there yet. Personally, I’d rather invest in a company that is consistently growing profits and has proven itself to be stable and reliable.

The three companies in the free investing report below are a good place to start looking.

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Disclaimer: Any information contained in this article is limited to general financial/investment advice only. The information has not taken into account your specific needs, goals or objectives, so please consider consulting a licenced and trusted adviser before acting on the information. Please read The Rask Group’s Financial Services Guide (FSG) for more information. This article is authorised by Owen Raszkiewicz of The Rask Group, which is a corporate authorised representative No. 1264179 of Strawman Pty Ltd (ACN: 610 908 211) (AFSL: 501 223).

Disclaimer: At the time of writing, Max does not own shares in any of the companies mentioned.