Stocks valuations, analysis. Unbiased. Insightful. Property of Wolfteam Ltd., www.wolfteamedge.com If you find the blog useful, LINK TO www.posledovich.blogspot.com Stocks, Bitcoin, Cryptocurrencies, AI, analysis, insights. CLICK ADVERTISEMENTS, SHARE ON SOCIAL NETWORKS! Technology, Bitcoin, AI, company strategy, stocks analysis. Stocks, crypto involve high RISK! Nothing on this blog is meant or should be construed as investment recommendation to buy or sell securities or their derivatives!
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.