I want to introduce a new contributer to Actionable Intelligence.
Taylor Collins will be contributing on a regular basis going forward. Look out for his upcoming articles.
Mind Blowing Valuations – Tesla, AirBnB, DoorDash
Saturday, 12/19/2020
By: Taylor Collins, Actionable Intelligence
The stock market, and in particular, stocks popular among millennial “Robinhood traders” (who have never had the privilege of experiencing a deflating bubble) have been all the rage lately.
It’s fascinating to see companies like Tesla being added to the S & P 500, when it took 16 years for the company to even turn an annual profit. What’s even more astonishing is the enormous market capitalization of Tesla (and similar companies we’ll look at), when compared with their senior and more established competitors.
Tesla’s market cap currently stands at $658 billion ($659 billion if rounding up), beating out Warren Buffett’s Berkshire Hathaway by roughly $133 billion. This is incredible considering Tesla only has a global market share of 1% for passenger vehicles. The chart below illustrates how Tesla’s market cap exceeds the combined market cap of the world’s biggest auto makers – keep in mind Tesla has added 80 billion to their market cap since this chart:
And Tesla isn’t the only case study worth calling out right now. AirBnB just had their IPO on December 7th, it’s market cap surpassing the combined market cap of the 3 largest global hotel chains (Intercontinental, Marriott International & Hilton Wolrdwide Holdings). Less than 1 month ago I saw a CNBC article that read: AirBnB Files to Go Public, Turned a Profit Last Quarter.
At least AirBnB turned a profit in Q2 this year…. DoorDash, which also had their IPO back on December 9th, reached a market cap of $72 billion. This is pretty incredible considering the company loses hundreds of millions of dollars after having been in business for 7 years (they still can’t really hold a candle to Tesla though). Last year, DoorDash lost $667 million, and this trend continued in 2020, even with the pandemic and surge in demand for food delivery.
As a value investor, I will admit to having a bit of “FOMO” (fear of missing out) when watching unprofitable or “story” companies tear through the stratosphere, however I sleep better at night when I know the companies I’ve invested in have solid cash flows, strong management teams, sound business models, and other promising fundamentals. As you hear John talk about all the time, you can be an investor and own a piece of a business, you can speculate, or you can simply gamble, which is what a lot of these “Robinhood investors” are doing.
Additional links:
CNN Article: Tesla Posts First Annual Profit (dated January 30, 2020)
https://www.cnn.com/2020/01/29/business/tesla-earnings/index.html
Wolf Richter Article: Tesla, Quadruple-WTF Chart of the Year: It Should Just Sell Shares on Autopilot at Huge prices and Exit Sordid Business of Making Cars
Business Insider Article: AirBnB is worth more than the 3 largest hotel chains combined after its stock popped 143% on its first day of trading
Yahoo Finance Article: DoorDash IPO is ‘most ridiculous of 2020’ and ‘holds no value’: Analyst
DISCLAIMER: None of this content should be construed as financial advice, I’m not a financial advisor of any sort and you should always do your own due diligence. Never invest if you cannot financially afford to lose your investment.