It's a $20 billion company....actually $18.9 billion if you trust Motley Fool's analysis...close enough.Originally Posted by Guisslapp
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It's a $20 billion company....actually $18.9 billion if you trust Motley Fool's analysis...close enough.
It is valued what the market values it at, which is way higher than what MF values it.
There is going to be a lot of volatility in this one.
Those are different valuations, which I'm sure you know. HUGE difference between the values of the stock and of the company.
No, it is the same. Price of stock times fully diluted shares is the market cap (value of the company). Thus, the price of the stock is the market telling you what the company is worth.
The value you, me or MF places on the company is just our opinion based on our beliefs about the company’s future earning stream and the discount rate we choose to apply to those streams to determine an NPV.
Not trying to split hairs...but the value of a stock does not equal the value of the company**. Gamestop is a great example of how the two can depart. No way is GME the "market value" calculated from its inflated...BUBBLE!!...stock price.
Heck! you see this very thing on Shark Tank all the time. Some fellow wants $100,000 for 10% equity in his start-up endeavor and the sharks rightfully scoff saying NO WAY! is your company worth a $1 million. No different when investors chase a stock based on some rumor(s) and artificially inflate its share price.
**well, not necessarily so
Everyone has an opinion what something should be valued, and that is what makes a market. Value is subjective. It is a function of an unknown future - both what all market participants think will happen and the risk premium we are willing to assign today based on that expectation.
I don't agree with the strictly "value is subjective" concept, not for a company. Yes!! there are assumptions built into every analysis and that is the subjectivity portion of the calculation, but those assumptions are rooted in sound financials, marketing, and the good ole SWOT. I was a fulltime business consultant and still do it part time and putting a value on any business/company is done mathematically in the basic financials of cash flow, the balance sheet, etc...
In terms of stocks, traded on the open market, yes, the factor of unbridled enthusiasm for a stock, for some company (and its products) can artificially inflate the market cap. But then that becomes a pyramid scheme where early investors HOPE other fools continue to jump in and drive the price further up. In such a scenario a savvy investor can gauge this bubble and jump in, and then out, and take some profits with him. But, at NO TIME does that mean THE COMPANY is worth the market cap.
It comes down to this...if you were interested in buying a company, would YOU pay the inflated market cap value for it?
I wouldn't.
BTW, I am also involved in real estate. I work with investors helping them identify and then buy properties they can then flip and/or turn into rentals. As I always remind them..." a no deal is better than a bad deal," learn to walk away. Same is true with bad deal stocks...walk away.
We are saying the same thing. The assumptions you put in a discounted cash flow analysis are based on judgment, which is subjective. People have different expectations. A company is valued at what someone is willing to pay for it.
Small businesses sell for “discounts” because there are fewer buyers (thus they are less valuable).
The difference is, we professionals use sensible, time-tested assumptions, while who knows what the average retail investor uses! That was the point I was trying to make. Perhaps I wasn't clear enough.
Speaking of which!!! this retail investor (me!) just opened some positions in two sectors I don't know a lot about: cannabis and crypto. I THINK I have made some sensible investments...and I am in light, so no harm, no foul if it doesn't work out....Bought into two MJs, one of the cannabis companies specializes in recreational use and are developing products, including a beverage, hmmm...and the other focus on medicinal use of cannabis and is a reputable bioscience company.
I haven't seen the number in a while, but a few years back I read that individual investors make up about 6% of the market. We talk a lot about market movement, but the market never really moves without the institutional investors moving it. Sure, there are outliers like the GameStop stuff, but that's fleeting and it leaves as suddenly as it arrives.
Time is your friend. Impulse is your enemy. -John Bogle
CGC and GW?
Your time tested assumptions don’t work very well when dealing with disruptive technology. Never would have bought Amazon, for example.
Institutional investors control 94% of the market? Is that measured in volume i.e. number of shares traded daily? I know Hedge Funds and the like, Mutual Funds, and other entities trade in large numbers, and yes, buying/selling millions of shares in a block, or even hundreds of thousands, can move the PPS but such movements also influence retail investors who tend to follow the trends.
One thing for sure, like other industries and economic sectors, the whole equity investment landscape is changing. Platforms like Robinhood and Reddit have taken stock investing to another level, building on what firms like E Trade, TD Ameritrade started. The retail investor continues to get closer to the source...IPOs, SPACs, etc...and brokers continue to slip toward irrelevancy.
The same thing happened in the travel industry, very few "travel agencies" left, and it is gathering steam in the real estate industry too. The old tired real estate brokerages are dinosaurs and need to go away. Stock market investing is on the same path.
Did you mean GWPH?
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