I'm curious about investing and economy, and I always wonder about P/E ratios like Crowdstrike's (currently 450-something, was over 500 last week).
Some P/E ratios for today, for some companies I find interesting:
- Shopify: 615.12
- Crowdstrike: 455.70
- Datadog: 341.98
- Palantir: 212.34
- Pinterest: 187.67
- Uber: 99.0
- Broadcom: 77.68
- Tesla: 58.33
- Autodesk: 52.36
- Adobe: 49.23
- Microsoft: 37.97
What's going on here? Do investors expect Shopify, for example, to increase their earnings by an order of magnitude despite already having done extraordinarily well in a very competitive market? Can anyone ELI5?
Former equity analyst here. Nobody on "The Street" is actually valuing these companies on PE ratios. Tech companies often intentionally re-invest earnings back into the business in real time and so their reported EPS is often quite low and a poor metric to evaluate the underlying business on. So instead, analysts typically use other metrics like EV/EBITDA or even P/Sales ratios in their valuation models.
Very generally speaking, trading these companies is kind of more of like placing a bet on whether or not their future top-line growth will be dramatically different than the market's current expectations.
The only common belief held by investors in a stock is that the price is going to go up. You may have value investors with a belief that Shopify is undervalued based on earnings, you may have investors betting that the rest of the market will buy Shopify, you may have people who’ve seen the line go up and decided to buy…
Stock prices have been decoupled from earnings or “value” for a long time now and that’s toothpaste we will never get back in the tube. We are in the Robinhood age where you can buy and sell a stock in seconds with no effort.
> Stock prices have been decoupled from earnings or “value”
No, they aren't, but the market can remain irrational for longer than you can remain solvent. It doesn't help that our dear government seems loathe to actually ensure competitive markets.
not regardless, but only if. The future is unknown, so their bet is also based on that unknown. Is it foolish? Who knows. Did nvidia seem foolish if somebody made that bet before their ai boom?
You can also just say things you don't understand are always created by fools.
Now, there are some fools buying these stocks. But to say that each one of these has a high P/E because every shareholder is a fool is very reductionary.
> these are real, well run companies with good fundamentals
I'm not disputing that. But even "real" companies don't warrant P/E multiples in the three-digit range, unless there's a very good reason to expect them to grow their profits by 10x or more in the foreseeable future – and that has to be the expected value of earnings growth (roughly, the average growth over all possible futures), discounted by the time value of the investment.
P/E multiples over 100 are practically never justifiable, except as "someone else will come along and pay even more" – i.e., the greater fool theory.
TBH I don't think many figures here make any financial sense -- but I gotta hold it if my friends all hold it. And once everyone holds it no one is allowed to mass sell it because it's going to hurt your friends, and in finance that's a sin.
With numbers like that, either the market is crazy or the market believes the actual meaningful earnings are substantially higher than the GAAP reported numbers. Although even there the difference would have to be pretty big.
There's a lot of comments knocking the due diligence, but the call out of the threat vector and timing of this make it a bit hard to brush off as coincidence.
The problem was Windows giving arbitrary access to the kernel to software that can be updated OTA without user intervention and allowing that to crash the kernel, right? Wouldn't this mean that Windows is considerably less secure and stable than assumed?
Not really. These were kernel modules authorized and installed by the system admin. Of course kernel code runs the risk of crashing your system. The same is true on Linux, and according to another commenter it already has happened with Crowdstrike for Linux
He says he bought seven put contracts for $7.30 at the $185 strike. Absolute max profit, from CS going to -0, would be (185-7.3) x 7 X 100 = ~$125k.
I don’t know if the absolute amount of profit affects decisions here. It seems if he were more certain of what’s going on he would have bet a lot more.
> It seems if he were more certain of what’s going on he would have bet a lot more.
Outside of the HN bubble, $125K is already a pretty big sum of money to get all at once, and unlikely to bring too much scrutiny, if it was somehow not a coincident. Seems like a smart strategy, if the user was sitting on inside information and didn't want to ring too many alarm bells.
However posting on reddit about it, would not be such a smart strategy. I think it's genuinely just a coincidence, WSB gets plenty of worthless "DD" posts every day that end up amounting to nothing.
This smells of some inside trading. Someone internal at crowdstrike (or their relative/friend) got wind of this and is trying to save face if they get investigated.
Reading the post its obvious they don’t have a deep understanding of tech, while having that be core to their thesis.
It’s prohibitively hard to hack into a “cloud system” due to few possible entry points - as a reddit commenter said, open S3 buckets are tough to crack!
