Bart Wronski 🇺🇦🇵🇸🌕
Maciej Sinilo
Krzysztof Narkowicz@msinilo @BartWronski Tencent is somewhat specific, as its valuation is heavily affected by the Chinese Government and their actions. By law foreign investors can't even own Chinese Internet companies and many of their companies have third party entities to be able to participate in western markets, so it's even unclear what do you own when you buy shares. If this would be Western company their shares would explode, as they are incredibly undervalued when compared to NV.
@k_narkowicz @msinilo are they also affected by general uncertainties of Chinese economy? Their real estate market collapsing etc.
But I was also thinking about struggles of many US domestic game companies, tanking stock of Unity and similar, massive layoffs, even Epic that was so far bulletproof being concerned
But I was also thinking about struggles of many US domestic game companies, tanking stock of Unity and similar, massive layoffs, even Epic that was so far bulletproof being concerned
@BartWronski @msinilo That too, but in general gov interventions like big tech crackdown in 2020 feel like the major reason, when gov showed that it's not playing around. Layoffs hit almost everyone. Unity always had poor financials, but Metaverse hype pushed the stock up. Now it's AI hype time, so Unity stock went down to more reasonable levels and NV and AMD goes to the moon (e.g. here's a good NV valuation, pretty optimistic assumptions, but still only ~250) https://aswathdamodaran.blogspot.com/2023/06/ais-winners-losers-and-wannabes-nvidia.html?m=1
@k_narkowicz @BartWronski yeah, I dont follow it _super_ closely but it seem biggest changes are results of government actions rather than company results. Eg it took another big dive end of 2023 after https://www.theguardian.com/world/2023/dec/27/chinese-gaming-shares-fall-as-regulators-announce-new-proposals .. which was bad enough that they partially reverted it and found some scapegoats
@msinilo @BartWronski Yes, China is very special, as Beijing has a lot of power over their companies as opposed to the US. That said, in general prices don't have to closely follow value (company results). Especially when looking at the short term, where it's more like a measure of current mood and momentum. In the long term they should converge, or at least that's my excuse for spending weekends filling valuation spreadsheets :).
@k_narkowicz @msinilo there are numerous unprofitable companies that last for more than a deade with still decent stock prices, so you must be talking about a very very long term ;)
I personally don't think company results have anything to do with the stock price. It's only expectation of future value, or even a derivative of expectation of future value.
I mean, you don't make money from their results for most? (Only some pay dividends) but from selling at a higher price...
@BartWronski @msinilo Profitability is a limited metric. With e.g. classic DCF valuation, you would take equities and future cash flows. So a startup can reinvest everything for years and burn money with a promise of big returns, but Coca-Cola can't. You absolutely do make money from profits either indirectly through reinvestments/acquisitions driving future revenues/stock price, or they give it back to investors through buybacks/dividends.
@k_narkowicz @msinilo well, I am not arguing that it *cannot* follow profitability. It obviously can, and a massively profitable company will turn people's eyes and become a hot investment target.
But I thought your point was that value will long-term follow profitability, which I don't think is true, at all. All those P/E metrics can loosely correlate with market averages, but are useless when analyzing individual companies.
@BartWronski @msinilo Fair take. Just one thing if you're not familiar with DCF, (or similar tools) it gives you a nice framework to convert your story about the future of the company (Tesla will take over the car market) into stock price ranges with probabilities. So it's not as simple as the current price divided by trailing earnings and captures more nuances, but at the same time also has more uncertainty baked in (will Tesla take 50% or 90%, will market be 3T or 5T?...).