Overvalued stocks of 2019
Folks,
With all this talk of us being late cycle and what would have been the most laughable IPO ever (WeWork) had it actually been completed, what do you think are the most overvalued companies out there now? If you had one shot to put all your savings into shorting one company, which would it be and why?
To get things rolling, Beyond Meat currently has a market cap of $9b and last year's revenues were $100m - cue crazy revenue multiples. Banks that have recently initiated coverage on the company claim that they're well positioned for growth, have potential to claim 5% market share yada, yada, but how this turns out is really anyone's guess.. The reality is that there will always be friction in pursuing growth channels and further commercialisation, e.g. Tim Horton's has decided to drop Beyond Meat in Canada.
Keen to hear any thoughts on this stock or others that you might feel are overvalued.
Just about anything tech related hemorrhaging money with no clear business plan indicating that being cash-flow positive is remotely possible...
This is clearly the year VCs have perfected the pump & dump; have to give it to them and their investment bankers for being able to consistently package & dump overpriced companies. Undoubtedly retail investors will be stuck holding the bag when the music stops.
I just finished re-reading one of Howard Mark's older books and it's funny how well he nails things, especially re: public markets.
Agreed on the many tech companies recently listed - interestingly many of them have suffered share price drops since listing but in a gradual manner as opposed to a sharp correction, suggesting there is still a lot of confidence in them for some reason...
Which book is this? keen to check it out.
The Most Important Thing by Howard Marks. It has really good commentary throughout the book by prominent value driven investors too!
Interesting take on Tesla / Netflix mate. Thing is, what could be a catalyst for the market to get woke (in the words of Kanye West) and correct these crazy valuations?
Teladoc (TDOC) is massively overvalued. They are growing revenue while losing a ton of money, but the real issue is that they have very low utilization for their service - under 5% based on total encounters/total population with access. If people start using the service, they have to pay the doctors more, and they could actually go to negative gross margin based on a deep dive I did, albeit a while back.
On the flip side, if no one uses it, they will eventually lost customers
Interesting. Do these customers even come back after using the service one?
I’ve never seen them publish those numbers, but there’s probably a reason for that. It’s a pretty bad UX.
Hah, I think the bargaining power of doctor is a bigger turn off for me than the UI tbh.
This is not a good two-sided network because customers are extremely loyal to the suppliers of the platform (the doctor), very prone to disintermediation - eg. I like the doctor, I will call him / her going forward directly, instead of using TDOC. And doctors threatening to leave if not being paid nicely could exponentially decrease the network effect / attractiveness of this platform.
Oooof.
Not really how it works though. Doctors use TDOC on an as available basis, sort of like Uber. The doctor doesn't want to create or take the patient relationship as they'd need to then fit another patient into their already packed office schedule. Doctors use it during commutes or when they have no-shows or a slow day. In fact, TDOC has actually stated in court that because they don't want to create a doctor/patient relationship that a patient will never get the same doctor twice.
The doctors sign in and get $35-40/call and then try to crank a few out at a time. It is highly transactional, and the doctors have little bargaining power...because of this model, TDOC also tends to have low quality doctors, who have failed to thrive elsewhere.
If you want to short smth on valuation alone you're going to have a baaad time.
I doubt people really believe these valuations are real, sustainable and well-deserved. These are not fundamental valuations, but market pricing. The market still has loads of money, so there may be still room for burning some more cash. But eventually reality catches up. Call it reversion to mean, back to fundamentals, distrust, sputtering engine, music stop with musical chairs . Even on that moment it is important to understand where the value of the asset is coming from, fundamental sustainable or just from passing the bag to the next one? Agree on : many business cases bleeding money looking for growth: expensive customer acquisition by subventioning product/service, in the hope to gain enough market to make it. Risky game, better have a bullet proof strategy, tech, product and hope competition is less equipped.
Well i never short on valuation, there are far more better reasons to short a company, so i might be biased here. Also market usually tends to overreact/overvalue, so no reason to argue that something is overvalued, it's always overvalued and it will be that way most of the time.
We do not invest. WeWork.
Alibaba(perhaps) I know this guy who is a bigshot at Merril Lynch and hangs out at my local bar. I bumped into him and we talked a little about the market and he told me he has a short position in Alibaba. Essentially he tells me that the accounting numbers are BS and Jack Ma stepping down has large Chinese Shareholders on edge.
This worked out well!
UBER if what Larry Ellison says is true, that their software is easy to replicate and has no competitive moat...
https://www.barrons.com/articles/oracles-larry-ellison-calls-uber-and-w…
Isn't it already widely known there's nothing special about the ride sharing software itself? The advantage of Uber is first-mover in that they're easily the largest ride sharing company brand and have invested the most (compared to peers, idk about google and others) into research on self-driving car tech. By being the largest player and aiming to be the first with the self-driving tech, they'll be the first ride sharing company to achieve scale and profitability. Once that happens it doesn't matter if other ride sharing companies pop up because they'll experience the same money losing problem at the start, and no one will accept that when there's already a comparable and profitable alternative that's dominant across all major geographic markets. Classic race to the top and winner-take-all scenario.
I disagree, I think the companies with the hardware (self-driving vehicles) will ultimately have the cards. Tesla and GM.
SHOPIFY
Care to elaborate?
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