Articles that conflate worth and market cap should be flagged as clickbait.
To take another angle on it: Market cap is simply the number of shares outstanding, multiplied by the last price anyone paid for a share. This means that market cap is determined by the tiny minority of people who are actively trading shares in a company. That group may or may not be deciding what the company is worth according to the same criteria that you or I or the vast majority of people who are simply quietly holding on to their shares might want to use.
[1]: https://en.wikipedia.org/wiki/Mr._Market, http://www.berkshirehathaway.com/letters/1987.html
Further, the reason why the market cap works is because every transaction has a buyer and a seller. The seller believes the price they are getting is above what it should be, while the buyer believes it’s below what it should be. As a result, the actual price is a consensus between people who have very different outlooks on the company, and as such almost necessarily incorporates a lot of different, and likely non overlapping, information.
A better word would be "compromise", since there is no consensus by definition.
But another point is that I always think of the price of a stock as deceptively precise. If you measure anything in a scientific sense, there is an associated +/- uncertainty. The value of a company always has an uncertainty and it might be quite large as a percentage of the total size. So when you look at the price going up and down, maybe it's only fluctuating within the zone of uncertainty.
Below is copy pasted from above website. In any case, share prices fluctuate a lot, due to many factors. And every time, someone writes an article about it, but it never means anything.
Misconceptions About Market Caps Although it is used often to describe a company, market cap does not measure the equity value of a company. Only a thorough analysis of a company's fundamentals can do that. It is inadequate to value a company because the market price on which it is based does not necessarily reflect how much a piece of the business is worth. Shares are often over- or undervalued by the market, meaning the market price determines only how much the market is willing to pay for its shares.
Although it measures the cost of buying all of a company's shares, the market cap does not determine the amount the company would cost to acquire in a merger transaction. A better method of calculating the price of acquiring a business outright is the enterprise value.
>Although it measures the cost of buying all of a company's shares, the market cap does not determine the amount the company would cost to acquire in a merger transaction. A better method of calculating the price of acquiring a business outright is the enterprise value.
It literally isn't. Market cap is literally the current share price multiplied by the number of shares outstanding. It's literally a different thing.
Apple's failure to innovate was Microsoft's opportunity to surge ahead.
They are both "true" values in different senses. If anything market value is "supposed" to be an integral of the total lifetime book value. Book value in turn is the integral of transactions up to the current time.