Crypto Valuation

Bitcoin and other cryptocurrencies are undervalued.

Crypto is experiencing a classic boom and bust price cycle.

There is inherent value in Bitcoin as a store of value, unit of account and a means of exchange, not to mention the underlying blockchain algorithm, which is priceless in my humble, personal opinion.

Yes, Warren Buffett has said that crypto is a bubble, but he also invested 1 billion USD in Nubank, the Brazilian neobank, cryptocurrency bank.

Many people were sceptical of the new, new thing in the past, but many impossible things became possible.

Bitcoin should survive this crisis and many other crises it will experience in the future, if it is to become a stable financial asset class both for Wall Street and Main Street.

Does an Unprofitable Technology Company Has Any Value at All?

Actually, this is the age old debate between growth and value investing or Silicon Valley against Benjamin Graham.

In short, I think a loss making technology company has value if its sales revenue has grown by more than 20 % in the last three years, controls its cost base well and can show clear projections that it can become profitable soon, that is 5 years at the most. However, all this is nothing if the technology company in question has no discipline.

The money creation or more simply put money printing by central banks in the last 12 years has created more than 10 trillion USD of new money all over the world. I can understand technology start-up founders  -> they adhere to the "move fast, break things" Moto of Mark Zuckerberg, founder of Facebook, later renamed to Meta.

However, "moving fast" or almost at lightning speed means you do not have a lot of time to plan. And when you do not have time to plan, costs can easily be misjudged and the cost base can spiral out of control. Meta, Twitter, Amazon, Oracle and many technology companies showed lack of discipline, overhired people and now the whole of Silicon Valley is firing, putting on the street more than 200 000 people. It is interesting what the tech CEOs, directors and finally managers explain to the people they re letting go: "Oh, we over-hired, we are sorry we are "throwing you out on the street". This is a business decision." 😀😢

The problem with this line of thought is that in the next (several) rounds the "cutting" managers, directors and CEOs will be the ones that are cut, because many of the niche technology firms and some of the most famous, household corporations in information technology today simply will not survive.

However, it still makes sense to invest in technology companies, in my personal opinion. In the long-term, though.

I personally think the next few years will be prime time for dividend yielding stocks. Or Warren Buffet will come in his prime. It is interesting to note, though, that Warren Buffet has said numerous times that he prefers to invest in companies that are reinvesting their profits and not distributing dividends. Berkshire Hathaway, the conglomerate controlled by Warren Buffett also does not distribute dividends.

And in the same time Berkshire Hathaway, under the guidance of Warren Buffett invests its cash reserves to a large extent in high dividend yielding stocks like Coca Cola, JP Morgan, Citigroup, Bank of America, American Express, Moody's etc. One has to think. 😀

Bitcoin Will Survive. Personal Opinion

 

Bitcoin's price in USD is hovering around 16 000 USD.

Bitcoin suffered badly after the FTX debacle and frankly scandal.

The Blockchain is priceless. In due time this will be realised.

Bitcoin's price could fall even lower in the mean time, however.

However, Bitcoin provides immense value as a store of value, unit of account and a means of exchange or money, that is.

In addition, Bitcoin is much more efficient, its transfer costs less than even electronic money transfers.

In short, Bitcoin, the leading cryptocurrency is a disrupter.

As with most disrupters like the internet, it could take several decades before the commercial value of Bitcoin and other cryptocurrencies is fully unlocked.

Twitter, Meta, Snap, Pinterest? Which Social Network Company Has Higher Growth Prospects?

Both the publicly listed Meta Inc, formerly Facebook and Snap Inc, Snapchat application owner, Pinterest, the social network are undervalued.

In the long term, 7 to 10 years from now, I believe Meta's market capitalisaiotn can rise 4 times, while Snap's market capitalisation can rise something like 14 times, yes 14 fold from current levels. Pinterest's market capitalisation can rise 10 times, according to my estimates.

Regarding Twitter. I just read an internet post that Elon Musk is changing quickly Twitter's corporate culture which will bring turmoil, chaos, negative outcomes in the near term, but will increase Twitter's value immensely in the long-term. Twitter's stock is not publicly listed.

Actually, I doubt the above proposition regarding Twitter. Yes, Twitter at its former around 40 billion USD market capitalisation was significantly undervalued. But Twitter has carved a niche for news and it will be very difficult for Elon Musk to turn it into a giant social network, an everything application, as the leading Chinese apps like Tencent, Baidu etc. as the aforementioned internet post supposed the world's richest man intends. 

What could happen is, actually the disruption in Twitter Inc could bring fruits much slower than expected, just because it is very difficult to change people's perception of what Twitter is really good at.  However, the current changes could  affect some things positively. There is a lot of unlocked value in Twitter, but I think it lies more in product development and sales.

Anyhow, I wish Elon Musk the best of luck. I am a regular Twitter user, after all. 😀👍👏

Leading Technology Stocks Valuation

Apple is 50 % + overvalued.

Microsoft is 37 % + overvalued.

Amazon is 63 % + overvalued.

Alphabet is 42 % + overvalued.

Meta is 12 % o overvalued.

Netflix is 10 % overvalued.

NVDA is 40 %  overvalued.

AMD is 25 % + overvalued.

Tesla is 70 % + overvalued.

Snap is 13 % overvalued.

Pinterest is 17 % overvalued.

Apple Valuation and Analysis

 

Apple Inc, the Mac, iPhone and iPad designer is currently valued at 2.38 trillion USD.

I estimate Apple's intrinsic worth at 1.0 trillion USD. And this is predicated on the assumption that there is no global both economic and social cataclysm that disrupts Apple's manufacturing supply chain.

Actually, Apple's current market capitalisation is equal to the sum of the market capitalisations of Alphabet, Google's owner, Meta, Facebook's owner and Amazon. I think the market here is roughly right. Manufacturing is valuable long-term. The bursting of the current technology bubble is clearly showing again that being profitable matters. Many unprofitable cloud computing, cryptocurrencies and other technology companies' the business model of which is predicated on cheap financing have lost 40 % + of their worth and many of them will go out of business.

While Apple's profitability and stable industrial design and manufacturing business model has provided Apple's market capitalisation with extreme endurance.

I expect there will be a prolonged and deep global economic recession which will test the durability of even the most profitable companies, with most sound business models and fortress like balance sheets.

The pending economic depression will test Warren Buffett and his proverbial value investing approach.

In my opinion, not cash, but profit is king. As it has always been.

Can Tesla's Stock Price Go to Zero?

Yes. I think it can.

Frequently, in blogposts on this blog I have estimated Tesla's intrinsic worth at 120 billion USD which I deem is the value only of Tesla's electric vehicle production technology and the quality and skills of Tesla's staff.

However, I have frequently written here that if Tesla cannot achieve a technological breakthrough and find a way to produce electric cars with consistent profitability, it can go out of business and Tesla's stock price can go to zero.

Now that Elon Musk, Tesla's CEO is devoting a large part of his time to Twitter I doubt that Tesla is being managed very well.

And Tesla, although it has vast cash reserves still needs government subsidies and external funding to remain a going concern in the mid-term future.

So, if markets do not turn positive and if Elon Musk underestimates Tesla's business and mishandles the electric vehicle manufacturer's management, Tesla could well go bankrupt.

Cryptocurrencies Analysis

Cryptocurrencies, Bitcoin's price developments seem to be influenced by several factors.

Stock market sentiment, especially in technology, Nasdaq mainly is one of the main drivers of crypto.

Cryptocurrencies are essentially financial technology, fin-tech leveraged investment play on information technology, which for its part is a leveraged play on the general economy, due to the low capital and operational requirements to start an information technology firm.

On the other hand, the public's psyche and especially its inclination to accept cutting edge financial technology like crypto and Bitcoin is also a decisive factor in the long-run, especially. If  people decide that Bitcoin is useful, that is its advantages prevail over its disadvantages, Bitcoin and cryptocurrencies will not only survive, but also thrive in the future.

Government regulation is a third set of factors, which determines the prices and ultimately the value of cryptocurrencies. If the government leaders of the world's major economies decide in concert to ban, outlaw Bitcoin and other cryptos, cryptocurrencies will face huge, potentially insurmountable difficulties to survive.

Another, fourth set of factors is the state of information technology. A case in point was the latest halving of Bitcoin, which decreased  by 50 % the energy needed to produce a Bitcoin. Bitcoin production consumes huge amounts of energy. That is why, the Securities and Exchange Commission has stated, determined that Bitcoin is a commodity. 

What is more, only 20 years ago the state and resources of computing power were not enough to create Bitcoin. So the power, efficiency and quantum leaps potential of information technology and computer chips hardware is extremely important for Bitcoin and cryptocurrencies to penetrate and ultimately change profoundly our lives.

Cloud Stocks Valuation Analysis

The listed stocks of 85 % + cloud computing services companies are still more than 30 % overvalued.

The smaller cloud computing companies, outside Amazon, Microsoft and Alphabet have mostly been unprofitable and have relied on cheap financing to finance their business as a going concern.

Now that the Federal Reserve has raised the Federal Funds Rate, its leading interest rate which basically influences all interest rates all over the world or in other words the Federal Funds Rate is the global interest rate to 3.75 % to 4.00 % cheap financing is simply not available.

And smaller cloud computing companies, which in numbers terms are most cloud computing companies are close to insolvency. Most of them have not more than 1 year cash surpluses, I estimate.

Even Amazon, Microsoft and Alphabet's cloud computing services revenue growth is either slowing or turning negative.

So all in all, investing in cloud computing has all along been essentially a rates play.

Now that the Federal Reserve is taking the punch bowl away, I forecast most cloud computing companies with listed stocks will not survive in 5 to 10 years down the road.

Cloud computing is the future, however.

So the remaining cloud computing winners, will have extraordinarily high market capitalisation and will realize huge profits.