If you were hoping that the Praemium Ltd (ASX: PPS) share price would fire up on news of a contract extension, you'd be disappointed.
The PPS share price sank 1.3% to an eight-month low of 61 cents in after lunch trade even after management announced the renewal of a major customer contract that's worth at least $3 million a year.
The win just wasn't enough to dispel the gloom on the market with the S&P/ASX 200 (Index:^AXJO) (ASX:XJO) index falling 1% with the tech sector recording some of the biggest losses.
The sector holds a number of expensive growth stocks and these have become the favourite punching bag for market bears in the sell-off.
A hollow win
The Xero Limited (ASX: XRO) share price tumbled 2.4% at $39, Link Administration Holdings Ltd (ASX: LNK) share price fell 1.7% to $6.72 and Altium Limited (ASX: ALU) share price lost 2.5% to $21.38 at the time of writing.
Praemium's contract extension is with Asgard Capital Management. The financial planning and administration platform provider has held this contract for 11 years and provides portfolio administration services to Asgard.
The new contract is for six years from November 2019 with a minimum three-year period.
While this is good news, it's easy to see why investors aren't particularly excited as the contract value is small relative to the $42 million in revenues that the company posted in FY18.
The contract win also does little to address concerns that the stock has run ahead of fundamentals. Even after Praemium's share price crash of 40% in the last three months, the stock still trades on a lofty consensus FY19 price-earnings (P/E) multiple of over 30 times.
Foolish takeaway
I think the outlook for Praemium is bright given that superannuants and investors are moving away from the large financial institutions like AMP Limited (ASX: AMP) in favour of smaller investment managers.
But I suspect that high P/E growth stocks will lag in 2019 compared to value stocks, which have played second fiddle to their growth peers for most of this year.
Having said that, I'll exclude large financial stocks like the AMP share price and Commonwealth Bank of Australia (ASX: CBA) share price from my list as I think these underperformers are more value trap than real opportunities.
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