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Strategies & Market Trends : Value Investing -- Ignore unavailable to you. Want to Upgrade?

To: bruwin who wrote (74665)	12/29/2023 8:41:56 AM
From: Sean Collett	1 Recommendation Recommended By JohnyP Read Replies (1) \| Respond to of 78778

I think of Uber and AirBnB as middleman tech companies. They sure make life more convenient, but they offer minimal value if they can't be ran for consistent profit. Uber last year had negative $9B in net income, negative operating margins, with an EBITDA margin of -24.5%. All the while their total debt has ballooned to $10.9B as of their latest 10-Q. They need a low rate loose money system to stay in operation. If we are in a "bull" market I would agree with Elroy in that really the only thing folks look for is rising revenue. This can be seen in the fact that Uber itself is trading for $63/s right now which is up 148% from the Jan 3rd close of $25.36/s. Fundamentals don't matter now, but we're clearly moving into a different stage of the market. These companies need consistent user usage/growth to maintain these valuations. Earnings warnings in recent 10-Q's (see Walmart) are enough to see there is going to be some pain and then I challenge that these parabolic rises for the Ubers will not just resolve sideways. AirBnB with an EV/EBITDA of 27 and Uber with 52.... -Sean

To: bruwin who wrote (74665)	12/29/2023 8:42:03 AM
From: Elroy	Respond to of 78778

Personally I wouldn't classify AMAZON as an IT or TECH stock in the strict sense of the word. Ok, but come on, who cares? My point is that the main driver of tech stock prices is revenues. You are trying to redirect that big picture "forest" point into discussion of the trees and their leaves...... But where UBER and Airbnb have turned out to be success stories, just think of ALL those other IT entities that ended up Bankrupt in the "Dot-Com Bubble" days back in the 1990's when interest rates were low and contributed to much SPECULATION. A lot of them had initial soaring Revenue, but that soon fizzled out to zilch. This comment doesn't disprove my claim that sales is the main driver of tech stock prices. No IT stories with rapidly growing sales went bust. The companies that went bust failed to deliver the revenue growth which was expected when their share prices rose. Obviously, if you spend more money than you make, and you can't use the debt or equity markets to raise capital, you'll go bust. However, if your sales are growing rapidly, you can generally issue equity at high prices and voila, you got more capital. Are you disputing the claim that revenues are the most important driver of tech stock prices? Any tech investor is going to agree with that view, so if you're going to dispute it you're not going to have much support.

To: bruwin who wrote (74665)	12/29/2023 9:12:40 AM
From: FIFO_kid2	2 Recommendations Recommended By Lance Bredvold Spekulatius Respond to of 78778

I think the main driver of what is relevant here is dependent upon the monetary cycle and the appetite for risk. If you can pick a leader in a business with major secular growth with easy monetary tailwinds like QE and zero interest rates returns on capital are certainly overlooked for quite some time and the growth story seems to become very important. But when monetary conditions tighten debt and the ability to raise capital raises the risk and the growth story becomes less important and that is why those unprofitable stocks suffered a greater percentage loss when monetary conditions tightened. Money losing tech works fine in the long term if you can pick the leader and get the secular growth theme right and assuming that management isn't overly greedy which measuring them is the toughest task in investing. To this day I own 40% of my EQIX scaled positions acquired in 2002 and at the time when acquired the company was losing money but I understood the secular growth of data and its leadership position. ROIC is my favorite accounting metric especially for businesses showing secular growth and where your methodology shines is it requires the least amount of work, research and less alpha risk. However, it is important to classify if the business is cyclical or secular growth. If it is secular growth the investment can tolerate too much capital and use a buy and hold strategy (currently a problem Buffett has).