If you can conservatively forecast Netflix's earnings in a way that might justify its current price, I'll take a photo of me wearing underwear as a hat and will keep it as my Twitter photo for a month.
Would you mind explaining how one would reliably extrapolate into the future absent recent history, beyond event-driven special situations? RIP low-risk high uncertainty; MoS today, knowing tomorrow won't work out perfectly; acquisitions & expansions generally unreliable.
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By understanding how the biz actually works. Take subscription models (just one example) - huge up front costs (cust acq) but huge long term FCF when succssful. If you just extrapolate from past you will grossly undervalued many companies.
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Change "when" to "if." Respectfully, I wouldn't know how to invest in the businesses you just described. Re retail, Lynch, who loved growth stocks, wouldn't invest in hyper earnings growth (>25%). Highly unpredictable; usually Wall Street darlings; usually high premiums.
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Tons of examples but I’m sure u get the idea.
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In short, understand the biz and size the market opportunity. Adjust as new info becomes avail. And always watch for disruption risks/opportunities.
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You mentioned biotech in another post. Extrapolation is useless.
Thanks. Twitter will use this to make your timeline better. UndoUndo
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A simple example. You find a retailer in rapid growth mode (FCF is negative - adding lots of stores). Don’t value/extrapolate based on past. Value based on the economics at the store level and estimate how many stores the mkt demands.
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