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Cloud -> Amazon, Microsoft, Alphabet, HashiCorp, GitLab
AI -> NVIDIA, AMD, Microsoft, Amazon, Palantir
Cryptocurrency -> Robinhood Markets, Square, Tesla
These are the stocks that, in my opinion, could be the beneficiaries of 2022 themes, as I forecast them.
Technology stocks, especially US listed, are in a bubble. They are overvalued.
Small, mid cap tech stocks have corrected, so the bubble there lessened.
The top five technology stocks Apple, Microsoft, Amazon, Alphabet, Google producer, Meta, Facebook owner, however, remain much overvalued, in a bubble.
Global central banks, along with both retail and institutional investors could prick the largest (technology) stocks bubble in history.
Snap, maker of the Snapchat application, according to my estimates and projection is worth 140 billion USD or almost two times its current market capitalization of 78.3 billion USD.
Snap's market cap growth that I estimate is predicated on young user demographics, cool interface, videos and cameras as megatrend and reaching profitability soon.
NVIDIA, Palantir, Amazon, Microsoft, AMD are several of the companies that stand to benefit most from Artificial Intelligence or AI.
NVIDIA, even at approximately 770 billion market capitalisation, could prove grossly undervalued in the long run. Simply because artificial intelligence, AI, machine learning or software algorithms guiding hardware are going to change everything.
Even at their current huge as nominal values market capitalisations NVIDIA, Palantir, Amazon, Microsoft, AMD, in some cases 10 or 100 times or even more larger than single countries' annual output or GDP, could prove undervalued on the transformative, disruptive, technology breakthrough power of artificial intelligence.
Twitter is grossly undervalued at its current 35.31 billion market capitalisation.
Twitter is the place where modern people consume news, both mainstream media production and social media.
Yes, Twitter is more popular outside the USA. I estimate Twitter's intrinsic value to be 120 billion USD in the long run.
In the moment news, new, incoming management, freedom of speech assurance, technology leaps and the loyal customer base will, as far as I am concerned, insure that Twitter's market capitalisation rises to 120 billion USD.
HashiCorp, the multi-cloud mosaic type Infrastructure as a Service software provider is currently valued at 16.07 billion USD days after its Initial Public Offering.
Cloud based computing, the Infrastructure as a Service branch especially, is the future of computing. And HashiCorp's mosaic, lego type software for interchangeable IaaS cloud services provides for a much needed security if a cloud critical cloud computing leader like Amazon's AWS or Microsoft's Azure goes down.
In short, despite that now HashiCorp looks overvalued, in the long run HashiCorp could prove undervalued several times over.
Apple is on the verge of becoming a 3 trillion USD company.
Although Apple looks overvalued as things stand, the strategic alternatives before the company seem to be driving ever more both institutional and individual investors into buying Apple's stock.
The main growth vertical before Apple are Apple's services business opportunities and the potential to build an autonomous car.
While the essentially cloud based Apple services business has been thriving with high growth rates, higher than Apple's hardware margins and quick customer adoption, secured by the loyal user base of its hardware, it is in artificial intelligence, AI, powered autonomous cars where the future jumps in Apple's intrinsic value potentially lie.
Actually, the state of artificial intelligence or AI currently does not allow to build fully autonomous cars. AI currently has the cognitive potential of a two year child and this is optimistic. However, just the promise of such prospective AI developments drives huge increase in the market capitalisation of Tesla.
Only media rumours and mentions that Apple is building its own autonomous car cause Apple's stock price to increase significantly, at least according to many investment banks equity research analysts and media analysts.
Apparently, Apple would use the same approach to self-driving cars production as with its iPhones- it will just engineer, create sketches and design of the futuristic AI powered autonomous car and outsource the car parts production to established producers. Hyundai was mentioned as potential subcontractor to build the hardware parts for Apple's prospective self-driving vehicle.
Actually, I think producing television sets is another potential growth vertical for Apple. People are watching television longer nowadays than any other time in humanity's history and the TV viewers' engagement is quite strong. Apple could use its industrial design prowess to manufacture a piece of art television set, much like its Mac laptop, which I am using, and its iPhones and iPads which I am also a loyal and fond user of.
If Apple's autonomous car project and a potential Apple Television set, TV, get along to a certain stage, Apple's market capitalisation could even surpass 5 trillion USD in the next 5 to 7 years.
That said, however, I believe Apple's current intrinsic value is around 1.9 trillion USD, or with other words Apple is grossly overvalued.
Yes, I know Warren Buffett, arguably the most skilful investor of all time, holds more than 40 % of Berkshire Hathaway's investment portfolio into Apple stock. This, however, exposes Warren Buffett and Berkshire Hathaway to the proverbial "do no hold all your eggs into one basket" or low diversification risk.
And potential positive jumps in company value, could suddenly turn into negative jumps lower of a company's value.
At its current market capitalisation of 24.41 billion USD Pinterest Inc, the social networking company is undervalued.
In my opinion, Pinterest's intrinsic value is 75 billion USD or more than three times its current market capitalisation.
The world and social relationships with it is moving online. Pinterest, along with Facebook, LinkedIn and Snapchat is one of the four leading social networks. Pinterest's potential future growth, the digitisation of relationships, the advancement of women into the working life, the mega trend towards images and videos and Pinterest's current, be it mild, profitability, I think, ensures a bright future for the company.
In short, Pinterest has turned into a technology value investment currently.
Zynga Inc, the social gaming company, is undervalued at its current market capitalisation of 7.30 billion USD on 2.6 billion USD in realised revenue for the last four quarters, be it with a negative net profit margin of - 5 % on average.
I estimate the intrinsic value of Zynga is 10 billion USD. One reason is that the gaming market will soon surpass 100 billion USD in annual recurring revenue globally.
And Zynga has innovation edge, loyal and large user base and high growth potential.
At around 1 trillion USD market capitalisation, in my personal opinion, Tesla Inc. the electric vehicles producer, is grossly overvalued. I estimate the long-term intrinsic value of Tesla is 120 billion USD.
However, if Tesla succeeds in developing artificial intelligence good enough to power autonomous vehicles, then Tesla's valuation story changes dramatically.
If Tesla manages to produce good enough AI to enhance self-driving vehicles it can charge much higher prices compared to the cars it currently produces, because it will save people the ultimate limited resource - time, along with effort and money.
Which will be remarkable, as Tesla is primarily active in the luxury vehicles sector and there the prices of vehicles are quite high, since this part of the vehicles market is boutique essentially in nature.
However, the current state of artificial intelligence is akin to the intelligence of a two year child. And that is in the words of leading proponents, analysts and scientists in the field. Which means artificial intelligence or AI cognitive and 'thinking' capabilities can possibly be even less than that of a two year child.
As with every innovative, evolutionary, breakthrough technology, the outcome is usually binary at the very nascent stage. Autonomous vehicles are currently faced with a 0 or 1 outcome. Either AI to drive autonomous vehicles will be a resounding success or it will not live up the the current expectations as artificial intelligence, AI algorithms have done several times in the past 70 years.
Personally, I think artificial intelligence can be significantly better developed than its current stage.
GitLab, the online code repository and collaboration platform is currently valued at approximately 12.4 billion USD.
Which makes GitLab extremely overvalued, at least according to most commonly accepted company valuation metrics, especially given the fact that GitLab made 66.80 million USD in revenue in the last reported quarter ending in October 2021, be it with a 58.47 % year on year growth.
However, GitLab's business model of cloud computing, cloud hosted software development possesses something known as optionality in finance. The ability of the stock price to make huge jumps, here the market assumes higher, based on the underlying business of Infrastructure as a Service, cloud based software development and collaboration of information technology teams.
Such young companies with high possible future growth are very difficult to value. Simply because their underlying business could prove revolutionary, change the world, achieve exponential growth and secure the leading companies in that particular industry enormous revenues and profits. Cases in point are online retail and cloud, Amazon Inc, online search and advertising, Alphabet, Google's producer and smartphones, Apple Inc, social media and Facebook and many other examples of companies achieving spectacular success developing new technologies.
So if GitLab turns out to be a winner, it could win out really big.
It is just that there are too many unknowns, the main of which are the future development of the cloud computing market and GitLab's management ability to execute on the company's already well established technological edge.
GitLab and many very young technology startups are similar to young healthcare startups with revolutionary potential. But look at Moderna and Biontech, for example. Moderna and Biontech are proving life changing.
GitLab might also.
Bitcoin is currently trading at 46 456 USD per Bitcoin.
As far as I am concerned, Bitcoin's main value driver is people's willingness to adopt Bitcoin as money or unit of account, store of value and means of exchange.
In the short term many other factors have an influence.
When the United States Dollar appreciates driven by the movement lower in the yields of US Treasuries caused by the likely imminent raises of the Federal Funds Rate by the Federal Reserve almost all risk assets like equities prices, commodities and emerging markets currencies depreciate or fall in value.
Bitcoin, so far has not gone through a longer period of the Federal Reserve, the central bank of the United States, raising the interest rates levels in the USA and thus, due to the United States Dollar global reserve currency status globally, also driving interest rates higher around the world.
Bitcoin's price in USD has fallen more than 30 % since the beginning of November when it was already clear that due to the rising price levels in the economy the Federal Reserve will soon begin raising the interest rates levels via its control variable the Federal Funds Rate.
Many analysts were contemplating whether Bitcoin will behave differently than other risk assets due to its electronic global reserve currency status, be it in a limited form. Bitcoin's recent nascent history showed that the major cryptocurrency behaves like a risk asset.
Actually, I was expecting such a price development. Bitcoin's adoption as money is sill too nascent for Bitcoin to act as a safe heaven. The US Commodity Futures Trading Commission considers Bitcoin as a commodity and commodities exhibit the greatest price volatility among major asset classes.
In the short term speeches and statements by leading Bitcoin and other cryptocurrencies early adopters like Elon Musk, founder of Tesla, SpaceX, Jack Dorsey, founder of Twitter, Square, Marc Andreessen and so on make for Bitcoin price moves.
In the long run, however, it seems that the Federal Reserve and other leading global central banks's policies and the public's adoption will vie for influence over Bitcoin's price development.
I have noticed that when the news flow around Bitcoin and crypto gets louder and more frequent, Bitcoin and other cryptocurrencies' prices tend to rise. The higher frequency of news is usually, of course, connected with the public adopting more widely Bitcoin. But also technological developments can contribute to Bitcoin's price moves.
A way to invest in Bitcoin related stocks via the stock market are the publicly listed equites of Robinhood Markets Inc, the stocks and cryptocurrencies brokerage and Coinbase, the cryptocurrency exchange platform or cryptocurrencies bourse. Both Robinhood and Coinbase's market capitalisations have fallen a lot since the beginning of November along with the general stock market and cryptocurrencies' prices decline driven by the news of the imminent hawkish stance of the Federal Reserve, rising interest rates level, that is.
However, in my opinion, the current stock market, Bitcoin, other cryptocurrencies and commodities sell off will be overdone if it continues beyond February 2022.
Bitcoin is the pinnacle of the fourth industrial revolution driven by artificial intelligence or software algorithms, that is. Artificial intelligence, AI, or algorithms are an ingenious way to save costs for corporations. And since the dawn of capitalism every high ranked manager in a corporation will tell you that one of his/hers main goals is to to save on costs and thus increase profit distributions to capital owners, which is the essence of capitalism, in fact. And this is why capitalism has worked so well, thus far.
The previous revolutions, like the industrial revolution, also brought in machines to automate manual labour usually done by humans. The current AI fourth industrial revolution has the same nature. Bitcoin is the financial edge of the current artificial intelligence industrial revolution.
People hold banknotes and the related fiat money in banks and in electronic form, because that is a much more efficient, cost saving way to store wealth and banknotes. Banks and electronic accounts balances save people time, money and effort and in a significant way at that.
Thus, the current fourth industrial revolution driven by artificial intelligence, AI algorithms is also a significant driver of Bitcoin's value. Bitcoin's existence and creation is secured by the blockchain, a hashing algorithm which creates, transfers and perpetuates Bitcoin and which all other cryptocurrencies are base.
So the state of technology or algorithms in this case is also a very important force that drives Bitcoin's value.
What is more, apart from being an emerging alternative to money, Bitcoin is close to disrupting financial intermediation. Up till now, Bitcoin's price volatility has made it difficult for Bitcoin and other cryptocurrencies to be utilised as a means to transfer money or wealth. However, with the rising participation of institutional investors in the crypto market, Bitcoin's volatility is bound to fall.
In addition, Bitcoin provides the infrastructure for other cryptocurrencies, especially new ones. Companies, via a White paper, can issue cryptocurrencies bound to the respective companies' projects with which young and emerging technology startups can finance their businesses in relatively large amounts via an Initial Coin Offering or a Initial Exchange Offering involving the issued cryptocurrency. Similar in amount to a series A or series B funding, as these startup funding rounds are known, but with the particular company characteristics more suitable and adequate for what is known as angel investing. Or very immature, sometimes only an idea on a napkin startup stage of development.
In short, Bitcoin and the cryptocurrencies market can disrupt investment banking and the investment banks which finance companies by taking them to public stock markets through a process known as an Initial Public Offering or an IPO. And cryptocurrencies can also possibly disrupt the Venture Capital industry.
Apple Inc, the iPhone, Mac, iPad and App Store services producer, is close to attaining slightly above 3 trillion USD market capitalisation.
This amounts to Price/Sales ratio of 8.27 and Price/Earnings ratio of 31.99.
In short, I believe the intrinsic value of Apple Inc is around 1.7 trillion USD. Revenue is growing strongly with 34 % approximately year on year on average for each of the last four quarters. But still the main revenue and profit engine of Apple are iPhone and other hardware sales. iPhones are simply Apple's moat via which the company extracts extra revenue and higher profit margins through its App Store and iPod services offering.
I really doubt that Apple will be able to grow mostly revenue, but also profits by more than 20 % on average in the next 5 to 7 years. Yes, as the world's population gets wealthier, global consumers will move up higher along the smartphones and computers value chain and demand more in numbers and more expensive iPhones, Macs and iPads.
However, I doubt the coronavirus crisis will end soon. And the current coronavirus health crisis just saps the living standards of most people around the world. What is more, energy inflation and overall consumer price growth is close to galloping which would create huge problems and possibly lead to social unrest globally. And social unrest is hardly conductive to buying luxury goods like iPhone
Warren Buffett holds more than 40 % of its more than 200 billion USD investment portfolio in Apple shares. But with a Price/Book ratio of 46.67 and a Price/Sales ratio of 8.27 Apple hardly looks like the proverbial value stocks Buffett has historically invested predominantly in. Yes, Warren Buffett invests also in GARP or Growth at Reasonable Price companies like Coca Cola. But Coca Cola's Price/Book and Price/Earnings ratios were never so high as Apple's.
Yes, Apple tries to develop its services offering portfolio. But people generally dislike subscription businesses, be it for psychological or pure financial reasons. Large part of Apple's services revenue comes from gamers playing games on the App Store. And the gaming market is not infinitely large.
I personally use an iPhone and a Mac and I must say both the iPhone and the Mac are excellent, extraordinarily good products. But currently Mr Market, as Benjamin Graham calls the stock market, prices in just too much growth into Apple's market capitalisation.
Success begets success. Apple's stock price run higher after the iPhone introduction attracted many new investors into Apple's stock and Apple's stock price just keeps rising. Apples' sheer market capitalisation size and inclusion into main stock market indices has attracted many institutional investors which attract ever new institutions who want to be a part of Apple's stock price rise.
And thus overvaluation occurs.
According to my estimates, Apple in the next 5 to 7 years is really worth 1.7 trillion USD. Apple's market capitalisation could go to 5 trillion USD in the next 7 years, but that does increase the risk that Apple turns into a giant stock bubble which will eventually cause a huge amount of wealth losses when it bursts.
Amazon's Amazon Web Services or AWS is the leader in cloud computing services with its approximately 30% market share. Microsoft is with circa 17 % cloud computing market share, Alphabet, Google, producer, is ranked third in cloud computing.
Cloud computing is the electrical grid of our modem information technology society. Long time ago many corporations were afraid to delegate the production of electricity which is still critical to production, so they had their own electricity generators. Yes, most companies nowadays also have their own electricity generators, but they serve mainly for back-up.
GitLab is an interesting niche player in cloud computing's mainstay Infrastructure as a Service. or IaaS. Goldman Sachs, Siemens and NVIDA already use GitLab's services. In short, the one who controls the software coding process will control the cloud computing infrastructure and GitLab has a significant edge in this.
Yes, the stock market listed GitLab is currently overvalued by most valuation metrics. But GitLab's advance has revolutionary potential which makes a 5-7 year call option on GitLab's stock seem severely undervalued.
Microsoft acquired the pioneer in hosted software development GitHub for 7.5 billion USD in 2018. But Microsoft is a large corporation, usually with slow inertia, slow to react to changes and slow to adapt. GitLab, on the other hand is an agile, quick, innovative, lean startup, be it valued into billions of USD now.
Yes, GitLab's founders have some dubious moments in their autobiographies, but when it comes to building an innovative IaaS startup I think the facts speak for themselves.
So GitLab's value is option like. It could be said that GitLab has unrealised potential. Huge, at that. Many people say that the one who controls information controls everything. And GitLab is on the way to be a large player in the production of software and software just stores, processes, analyses and outputs information. Guiding hardware as a result.
In short, I am of the opinion that GitLab is a rising technology star, which could reach a market capitalisation of 100 billion USD in 10 years, if management executes right, the cloud business is not over-regulated and if a new bright tech startup does not out-innovate severely GitLab.
Bitcoin's price fell from 66 500 USD to 48 324 USD currently or approxiamtely 25 % decline from its recent peak in the space of less than 30 calendar days.
Yes, in my opinion, valuation wise, investing in Bitcoin and other cryptocurrencies is worth the risk. It is just that the volatility or the price declines are very large. But a full history chart of Bitcoin's price in USD shows the main cryptocurrency has risen 150 fold for less than 6 years.
Yes, Bitcoin is still not adequate for pension funds or endowments portfolios, or at least not for more than 2 % of their assets.
However, the proverbial stable, value stocks, institutional investors keep buying like General Electric, JPMorgan Chase, Morgan Stanley, Goldman Sachs, AT&T, Chevron, Exxon Mobil, Verizon, Walmart, Target Corporation, Costco, IBM, Intel, Honeywell, utilities like Nextera Energy, Duke Energy, AIG, large capitalisation materials stocks did fell 50 % or more in the 2008-2009 Great Recession and subsequent stock market crash.
In other words, risk adjusted, investing in emerging technology stocks and emerging technologies like Bitcoin, cryptocurrencies, artificial intelligence of which Bitcoin's blockchain algorithm is part of is worth the risk. At least in terms of valuations, especially in more than 5 years holding period. That is my personal opinion and the last 20 years of stock market history clearly supports my thesis, especially the last 8 years since the emergence of AI or Artificial Intelligence.
If one enters a single technology stock at its price peak or Bitcoin or other cryptocurrencies, one can loose more than 70 % of its investment of course. As stocks like FitBit, GroupOn, DDD, GoPro, Zynga, Snap, Pinterest, Robinhood markets, Virgin Galactic and many other small and mid capitalisation technology companies and more peripheral cryptocurrencies have clearly shown.
Bitcoin and its underlying blockchain algorithm will change the world as we know it. And not only because Bitcoin and other cryptocurrencies save people time, effort, and money. The ones that are left behind by the new trends, will fall behind and not prosper. The new trends like cryptocurrencies have to prove viable, of course.
One just needs not to hold his or her eggs in one basket, or diversify its investment portfolio, of course. Yes, by diversifying you miss the opportunity for home runs or multifold return on the investment. But one avoids also catastrophic risk.
And its is extremely difficult to value emerging technologies like Bitcoin and cryptocurrencies. Not only does everything change, but it changes unexpectedly, abruptly and on a huge scale in such young industries.
One just has to adapt. Slowly, painfully and efficiently. Things do change, but they also remain the same. A classical Bayesian argument. The Lean Startup methodology is all about adapting, while Peter Thiel's Zero to One makes the argument of one large, stay the course, stable, strategic bet.
It is difficult to say who is right. Bitcoin and other cryptocurrencies are disrupting our world, but their long-term future remains uncertain.
All of us have to thread carefully, I think. Investors, traders, banks, money transfer firms, regulators, politicians and ultimately the people of the world.
Bitcoin's price is hovering around 50 000 USD currently.
Bitcoin's potential as a global electronic reserve currency and its underlying blockchain algorithm's financial technology and general industry disruption capabilities still make Bitcoin deeply undervalued in the long run.
In 2015 and 2016 many technology startups completed Initial Exchange Offerings or Initial Coin Offerings which are a signifcantly lighter regulated or not regulated at all version of an Initial Public Offering, IPO.
Initial Public Offering or the offering of new equity from a young firm to the public - pension funds, asset managers, hedge funds, endowments, family offices and individual investors by listing on public exchanges has been the main way via which more mature startups could fund themselves.
The issuance of cryptocurrencies via White Papers from various tech startups to finance themselves is a great innovative way for funding your companies. Thus, cryptocurrencies issued by specific technology firms are disrupting investment banking and venture capital funds. Investment banking, or the process through which an investment bank like Goldman Sachs and Morgan Stanley underwrite or buy short-term the equity offered by a tech start up to the public via IPO so the IPO can be successful has been performed by major banks.
Now this process can be done by startups also with help from investment bankers without paying too high fees, being profitable or being scrutinised by regulators. Investment banking includes mergers and acquisitions advisory, among other business lines, which can actually also be disrupted by cryptocurrencies' underlying algorithm or blockchain.
I expect financing by startups via the issuance of own cryptocurrencies to boom again. Soon.
Tesla, the electric cars producer, several months ago announced it will accept Bitcoins in lieu of payment for its cars.
Elon Musk recently started selling large parts of its Tesla stock holdings.
Even Elon Musk seems to have realised that at these stock price levels Tesla is grossly overvalued. Tesla's stock market capitalisation is just a giant bubble, detached from reality and any realistic assumptions for future revenue growth and profitability.
Tesla's Bitcoin exposure could, in fact, provide a new avenue fro growth of the electric vehicles producer. Bitcoin is the new internet or artificial intelligence. The pioneers in Bitcoin will be the leaders of tomorrow.
If Tesla is to substantiate its current market capitalisation, it has to enter and dominate other industries. Finance and Bitcoin is one of them. Unfortunately, Tesla is unprofitable so Tesla will not be able to use cash reserves to enter the cryptocurrency world. The only large value source for Tesla is Tesla's market capitalisation or the equity of the company.
Elon Musk is a very smart man. Some question his integrity, but that is another matter. He has realised that Tesla is very overvalued and seems to be slowly cashing out, arguably to fund new investments, Bitcoin and SpaceX among them. Much like he did with his PayPal's stock holding.
Only time will tell whether Elon Musk will again be right this time. Elon Musk can, however, teach a thing or two investment bankers on company valuation or at least the part based on the public's expectations and market tops.
GitLab's stock price has fallen around 30 % from its recent post IPO peak. Along with the entire stock market or at least the technology stocks outside Apple, Microsoft, Amazon, Alphabet and Meta.
GitLab's current market capitalisation is around 12.63 billion USD.
I would say GitLab's market capitalisation could fall to 7 billion USD in the short-term.
Long-term GitLab's market capitalisation can go as high as 50 billion USD on the promise of cloud computing and its main revenue branch infrastructure as a service, IaaS, where GitLab's main activities span.
Working, gaming, leisure and cooperation are all moving to the cloud. Software coding and the related cooperation as well. And GitLab already has a significant technological edge in the IaaS cloud computing market.
Robinhood looks undervalued at the current approximately 22 billion USD market capitalisation.
I see Robinhood markets as an investment in cryptocurrencies, especially Bitcoin. Robinnood markets is essentially turning into a cryptocurrency, Bitcoin merchant bank or at least a large part of its business.
If Bitcoin's price goes to 100 000 USD I think Robinhood will be worth 55 billion USD and it might temporarily overshoot its intrinsic value to 75 billion USD driven by investor euphoria.
If Bitcoin rises to 200 billion USD Robinhood could well be worth 100 billion USD.
Tesla is worth 120 billion USD and mostly because of its technology.
Rivian is worth 5 billion USD based on the forecast it will actually make revenue.
I had a professor once who said that the discounted cash flow models were considered old in the 2000 - 2001 dot-com boom. And then came the bust.
Wall Street Journal had an article about Cathie Wood and its Ark Invest company comparing the likes of Cathie Wood with Warren Buffett. The article concluded that the likes of Cathie would fizzle out like the rest.
The 'Greater fool theory' is all very nice, but somebody will be left holding the can. As always. And somebody seems to think the general public is not very smart. Well, I just hope things do not escalate after the coming technology stocks bust and the economic crisis that will follow.
But for now, the music is still playing and the dancing is in full swing.
Bitcoin is still undervalued.
If not outlawed by governments, I forecast Bitcoin will surpass 100 000 USD in 4 years and Bitcoin's price may rise over 300 000 in 7 years time.
Gitlab is currently worth 16.1 billion USD in market capitalisation on public markets.
Although overpriced in the short-term, GitLab market cap or value could rise to 70 billion USD in 10 years when the infrastructure as a service cloud market could easily achieve 700 billion USD in calendar year revenue run rate.
Bitcoin is permanent, because it solves one of the main problems of society - human nature.
Since Bitcoin is crowdsourced, Bitcoin is very difficult to manipulate. Many famous research analysts and portfolio managers say that nothing backs Bitcoin. What backs Facebook, an internet site or Amazon, an online store?
The same research analysts and investors say: "Bitcoin does not have cash flows to back it up". Where are the dividend cash flows that support Facebook or Amazon's stock prices of their approximated 1 trillion USD or more market capitalisations? But Facebook and Amazon are the future?
And Bitcoin, blcokchain and other cryptocurrencies are not? The Future?
The company valuations guru Aswath Damodaran, so called "the dean of valuation" has a new interesting book out. "The Value of Narratives".
The problem is we are at the end of value. The end of valuation. In capitalism and in the world and nature everything changes, so value changes constantly. That said, intrinsic value can remain stable for several years. Chaos theory is right. Almost all depends on the initial conditions and a butterfly can just be the trigger that explodes the gathered pressures in the system.
Yes, Bitcoin is here to stay. In one form or another. Digitalisation is the fourth, but largest and most comprehensive and all encompassing industrial revolution in the history of humanity.
Digitalisation is changing and will change everything: How we communicate, work, travel, sleep, eat and basically transform how we live. Why? Because digital saves us time, effort and money.
And Bitcoin is the edge of digitalisation. Throughout all its history, humanity's advance has been mainly guided by greed. And not, I don not think that EXCESSIVE "greed is good", like Gordon Gekko says in the Wall Street movie. Greed will sooner rather than later bring humanity to the edge of extinction.
But up till then, greed will drive progress. Because money is what makes one man prevail over another. Power with other words.
Bitcoin is the epitome of power. A digital, crowdsourced, untraceable, mobile, independently run means of exchange, store of value and unit of account. Money, with other words. Yes, Bitcoin still has room to go to become real money. Its volatility is a problem, especially.
Bitcoin, however, is progress. It is very difficult to stop progress!
Rivian is currently valued at approximately 125 billion USD by public stock markets. Tesla's market cap is 1.04 trillion USD.
Both Rivian and Tesla are heavily overvalued. In my opinion, Rivian is not worth more than 5 billion USD, while Tesla's intrinsic value is around 120 billion USD.
Rivian does not even have revenue! The investment bankers that underwrote and successfully sold the Rivian shares to institutional investors at the IPO have done something very extraordinary. Apparently, the hunger for the electric vehicles' story after Tesla's stock price meteoric rise is tremendous.
Electric mobility will indeed take a large market share of the current combustion engine dominated cars and other vehicles market, but I think electric vehicles' market share will be far less than the market seems to be pricing in both Tesla's and Rivian's market capitalisation.
Bitcoin and other cryptocurrencies have to become a store of value, a unit of account and a means of exchange to become money.
The store of value seems most difficult to attain for Bitcoin and cryptocurrencies as of now. Bitcoin is just too volatile or with other words too risky to buy and hold in order to protect one's wealth.
Several solutions to this problem have been proposed:
1) Stable coins. Cryptocurrencies issued by large corporations and pegged to the value of the USD or a basket to of the leading currencies.
2) Some other sort of intervention that will ensure that Bitcoin and cryptocurrencies' prices in general become more stable
Actually, both solutions will most probably hurt Bitcoin and other cryptocurrencies' chances of becoming real money simply because they will violate the single characteristic that makes cryptocurrencies special - they are independent, produced by society and do not depend on governments.
What I personally see as a solution to Bitcoin and other cryptocurrencies' price volatility is just increasing the liquidity of the cryptocurrencies market. This can be done by attracting more long-term institutional investors like asset managers, endowments and pension funds.
Many stocks start out as young listed companies with volatile prices, but as they build revenue and profit track record they attract a lot of institutional money, the market for their stocks becomes much more liquid and deeper and thus their price volatility subsides.
The sam can be a solution to Bitcoin and other cryptocurrencies' price volatility. First, however, Bitcoin's acceptance by the general public should markedly increase.
Gitlab is heavily loss making now valued at circa 18 billion USD market capitalisation.
Yes, Infrastructure as a Service is the future of computing. That said, Gitlab's promise is yet to be monetised.
Geek coding repository for now, Gitlab is slowly getting traction with large companies.
Gitlab's technology edge, though, could still make Gitlab a future profitable, thriving company if the management executes the obvious IaaS niche strategy right.
The secret is, according to my humble opinion, that Gitlab's management builds institutional feel for Gitlab.
Rivian is currently valued at approximately 110 billion USD without Rivian having any revenue.
Rivian is not worth more than 5 billion USD as Tesla is not worth more than 120 billion USD.
Rivian is a story stock based on the promise of green energy and electric vehicles. Much like Tesla.
Tesla, however, went public at a much lower market capitalisation. And Tesla's current market capitalisation at 1.05 trillion USD, makes Tesla Inc wildly overvalued.
Tesla is still not profitable. Tesla's technology, however, could help the electric vehicle pioneer sell itself for around 120 billion USD which is the current intrinsic value of Tesla, according to my humble opinion.
Rivian, however, does not even have revenue and Rivian is worth 110 billion USD currently. Yes, there are drug companies having done only experiments on a single world changing drug that have been valued at 1 billion USD. But Rivian's lack of revenue simply cannot explains a value of more than 5 billion USD. And the only reason I think Riviain could be worth as much is because of the large promise of electric cars.
Money creation or money printing as some analysts put it by the major central banks have distorted the prices of all assets. Pension plans administrators' unrealistic promises and commmitments to their pension money providers are making all asset managers chase unrealistic returns.
This greatest financial bubble in history will burst of course, but for the time being the stock markets going up party will go on for some more years, I think.
Gitlab, the code repository firm, is valued at 17.73 billion USD after its Initial Public Offering on Nasdaq.
I believe Gitlab's intrinsic worth is around 3.4 billion USD.
And this is based on my assumption that Gitlab will become a profitable company. At 150 million USD of Fiscal 2021 revenue Gitlab has simply too little revenue to justify a market capitalisation of above 3.4 billion USD.
Yes, the infrastructure as a service cloud computing market in which Gitlab is operating may well grow above 500 billion USD in revenue in 2025, but there are other formidable entrenched competitors like Microsoft, Amazon, Oracle and IBM which have huge research and development resources and already command significant market shares. Microsoft and Amazon, especially, have a huge edge with their 13 % market share each in the infrastructure as a service(IAAS) market.
At best, Gitlab could be described as a niche player in the IAAS market. Even if Gitlab proves another spectacular technology rising star success a 3.4 billion USD long-term intrinsic value should be enough compensation for that.
Most asset prices like stocks and commodities prices are inversely correlated to the value of the United States Dollar to the EUR or a basket of the leading currencies.
Bitcoin should also be inversely correlated to the USD. In times of crises investors run to the safety of the global reserve currency which is the USD and the related US treasuries bond market.
Bitcoin is also vying to be a global reserve currency, be it in electronic from. So what will be the likely parallel development of Bitcoin's price and the value of the United States Dollar.
I think it is pretty much possible that USD and Bitcoin could both appreciate in the future, especially Bitcoin. Much like the price of oil and the USD did through various periods in the past.
Bitcoin could actually function as a safe heaven alternative to the United States Dollar, far away from governments' control. Human nature and many government failures in the past have built a huge distrust in the general public, the technology and investment community in particular, towards official government institutions and their ability to police financial markets, the information technology industry and handle crisis, both economic and political.
It is exactly this distrust in official authorities that is one of the main factors driving the incessant increase of Bitcoin's price in the last 7 years.
That is why, I think Bitcoin could end up functioning as a safe heaven asset in turbulent times.
Bitcoin is undervalued at the current price of circa 62 000 USD.
Bitcoin's blockchain algorithm will disrupt our world and listed stocks like Coinbase and Robonhood Markets are set to benefit.
Currently Coinbase is valued at approximately 70 billion USD on public markets.
I estimate the following intrinsic value for Coinbase based on a prospective price for Bitcoin:
1) Bitcoin at 100 000 USD -> Coinbase is worth 120 billion USD
2) Bitcoin at 200 000 USD -> Coinbase is worth 250 billion USD
3) Bitcoin at 350 000 USD -> Coinbase is worth 340 billion USD
Even after its disappointing latest earnings report Amazon is undervalued on cloud computing
Amazon is the leader in cloud computing and now the cloud computing business has a 200 billion USD yearly revenue run rate with a growth rate of 35 % year on year.
Amazon's AWS cloud business' net profit margin is above 20% which coupled with the already large cloud computing industry and its stellar growth rate makes it possible that Amazon surpasses 3 trillion USD in market capitalisation in 7 years time.
At 33.85 billion USD market capitalization Robinhood is grossly undervalued in the long run.
Robin Hood is practically a cryptocurrency merchant bank. That is, a crypto investment bank.
Robinhood will be worth 100 billion USD if Bitcoin's price stays at 100 000 USD and 250 billion USD if Bitcoin's price reaches 200 000 USD, according to my estimates.
Amazon, Microsoft and Alphabet, the Google search engine owner, could double in value in the next 5 years on the very probable growth of their cloud computing businesses.
That can happen, despite all three Amazon, Microsoft and Alphabet being valued currently at more than 1 trillion USD.
Actually, I think almost all estimates of the cloud computing business market size globally underestimate the promise of cloud computing. Simply because such mundane tasks like TV watching, video game playing and even artificial intelligence, machine learning will most likely move to the cloud infrastructure as a service premises of the large internet companies.
The cloud computing business currently is very profitable with net profit margins usually above 22 %. Unless the cloud becomes commoditized, the cloud computing business holds exceptional rewards.
Bitcoin's price reached an all time high this week. Many famous stock investors like Michael Novogratz have reportedly made a fortune investing in the new asset class of mainly Bitcoin and other cryptocurrencies.
Yes, Bitcoin dose not provide cash flows in the form of dividends, but also do not Amazon, Alphabet, owner of Google, Facebook, Tesla, Netflix and most technology stocks. And yet they are worth tens of billions and often hundreds of billions USDs and in Amazon and Alphabet's cases more than a trillion of USDs.
I do think Bitcoin could prove an altertnative to investing in stocks, be it at a lower percentage of the overall investment portfolio.
Bitcoin is undervalued, transforming our world and barring a black swan event like governments outlawing it, Bitcoin and main other cryptocurrencies are set to thrive in the future.
Many analysts see Bitcoin as an investment substitute for gold. And yes, as the price of gold has stagnated, Bitcoin's price reached this week an all time high.
It is interesting that although the USD, the main currency in which Bitcoin's price is quoted, has appreciated, the price of Bitcoin has went further up. Unlike gold's price which moves inversely to the USD as measured towards the EUR and a basket of leading currencies.
I forecast Bitcoin's price could climb above 100 000 USD in 2022.
Institutional investor demand and excessive money creation by central banks will fuel the next round of Bitcoin's price increase.
The money printed, created by global central banks creates even more money via deposit multiplication.
And part of the newly created hot money will find its way into Bitcoin.
Institutional investors looking for extra returns will also slowly enter more the cryptocurrencies asset class.
The most obvious winners from the trend towards automation are NVIDIA and Microsoft.
NVIDIA, by producing graphical processing chips and computer chips, while Microsoft compiles the software to run the algorithms.
Many other electronic chips producers should also benefit.
Bitcoin, according to my estimates, is way undervalued.
The price of Bitcoin could surpass 100 000 USD in 2 years. Bitcoin saves people time, money and effort.
Bitcoin and the underlying blockchain algorithm will enhance dramatically the value produced by almost all industries existing today.
Tesla's market capitalisation is around 840 billion USD currently.
If Tesla's value falls to 140 billion USD, this would mean a loss of value of 700 billion USD.
This would most certainly be the largest loss of value for a single stock in history. Tesla's market capitalisation is simply of extraordinary size.
I estimate that a loss of 700 billion USD in value is not unlikely in the long-term. I judge the probability if that happening at 30 %.
Actually, I think Tesla's intrinsic value is 120 billion USD.
Amazon proves that cloud computing is a profitable business by achieving approximately 30 % net profit margin on Amazon Web Services, its cloud computing business.
This contrasts with Amazon's barely profitable US online merchandising business and consistently loss making international online sales business.
So cloud computing is really profitable if executed correctly. Most young technology start ups are loss making, even though many of them are unicorns or valued at 1 billion USD or more.
So cloud computing, which is slowly permeating every area of every day life and IT technology, could be the solution for profit making business endeavours for young technology start ups.
Amazon, Microsoft and Alphabet, owner of the Google search engine, have gained a lot from the move to cloud services and will continue to reap the benefits from their infrastructure and first mover advantage. Their market capitalizations could double in 5 to 7 years.
Other potential winners are Arista Networks and Cloudflare.
In short, cloud computing rivals in disruption capabilities artificial intelligence.
Tesla, according to my estimates, is worth 120 billion USD. This compares with its current market capitalisation of 777.65 billion USD.
Basically, Tesla's value hangs on a binary outcome. Either Tesla achieves a technological breakthrough, starts producing electric vehicles profitably and ends up being worth more than 300 billion USD or Tesla burns out of investors' money and the only thing left from the electric vehicle pioneer is its technology.
Personally, I think something in between will happen. Tesla will make some technological advances but will still not end up with a finished technology which can manufacture electric cars profitably, without subsidies. So that is why I think Tesla is worth 120 billion USD - either Apple or some other large company will buy up Tesla and further develop the technology to produce profitably electric vehicles and achieve at least partially the promise of electric vehicles. This is what happened in many other technology sectors like search engines - first Yahoo was the pioneer, then Google won. In social media - MySpace was also a leader, then Facebook came to dominate social networking.
Until then the price of Tesla's stock will be driven mainly by hype, rumours, news and both institutional and retail investors's hopes for a better green future.
I estimate Palantir Technologies, the data analysis via artificial intelligence, or AI, company is worth 200 billion USD.
Palantir's market capitalisation is currently 45.87 billion USD.
Palantir has found an ingenious way to scale artificial intelligence, despite starting with mainly consulting projects.
Artificial intelligence, abbreviated AI, is driving the current fourth industrial revolution and artificial intelligence is arguably the future of information technology and its application in business. Palantir's lead in AI can unlock huge value creation opportunities despite the obvious risks associated with every relatively young company developing a highly promising technology field.