The same would go for many other companies, especially in the tech sector.
Almost 20 years later, almost none of it has come true.
Maybe it is irrational, but at this point, it feels like the irrationality is likely to outlive anyone here.
After 2008, AAPL was trading for something like 7x earnings, GOOG same, MSFT same.
The funniest part is that people genuinely don't understand that these examples disprove the point they are making.
(And yes, NVDA is obviously overvalued...)
All I know is that it's been one of the terms being thrown around during the past 20 years as a reason why Apple's stock price will plummet to the ground and why I'm stupid for investing a large portion of net worth in it.
At this point, my upside is immense so unless something absolutely catastrophic happens, odds are it seems I'll be having the last laugh.
EDIT: I guess I don't understand the "gives you $1" part if we're not talking about dividends.
But in the real world, company valuation is an entirely subjective matter that prices in expected future growth or losses.
> it earns (or rather pays out to in that period) the shareholder
Comment I replied to was calling dividends, and only dividends, within a given year we're calculating P/E for no less, the company Earnings. That just isn't correct, whatever your views on valuation, shareholder ownership, and market efficiency.
Earnings thus either become dividends or become re-invested or are used to buy back shares.
P/E is the central metric by which to judge stocks on a fundamental level.
Profits are not the only thing either. Some assets give political power or power to shape the world. If NVidia made 0 it would still be very valuable because of that.
Others would simply tell you that it is:
(share_price / earnings_of_that_year) == price_to_earnings_ratio
Whether one should or shouldn't trade based on a particular P/E ratio has always been a matter of opinion.
It's based on market cap, not share price. Market cap is a function of share price (It's just share price * number of outstanding shares), of course, but to just say it's share price leads to misunderstandings.
Otherwise, that would imply that a stock split creates a multiplier of the P/E, ie, a company with a P/E of 20 does a 1:5 split ends up with a P/E of 100 post-split, and that's certainly not what happens.
P/E is defined usually defined as `share price / earnings per share`. Market cap is `share price * number of shares`. Via simple substitution, this means P/E is equal to `market cap / earnings`.
But calling P/E `share price / earnings` is simply incorrect.
In short: net income is total, "earnings" is "per share"
2005 it was a gamble I have no idea, and if they hadn’t invented the iPhone they would have been DOA.
To some degree, they will need another revolutionary product as iPhones seem pretty mature, and I think they are still a little unsteady on that front judging from Vision reviews and sales.
There were a ton of promising companies back then that no longer exist today. But you don't hear about then in HN.
There is no rational universe where a company can be worth almost $3T, and at the same time, investors know there is a ~% chance every year that Taiwan gets attacked or blockaded, and that company won't be selling anything for half a decade, minimum. It's like betting on the Death Star fully knowing the exhaust port issue exists. Complete with "but surely our fighters (er, US government) will prevent anyone from actually hitting that port."
At this point, I just believe the entire stock market is irrational and in the stratosphere; simply because, where else are you going to invest? Too many investors, not enough companies. But what goes up...
(Edit: I'm primarily referring to Apple here. I am aware NVIDIA primarily uses South Korea - but at the same time, if something were to happen to Taiwan, even NVIDIA will need to prioritize fab capacity.)
another million dollar question: is the likelihood of another magnitude ~8 SF earthquake priced into nasdaq?
Just because some 1% chance that a new Jedi comes along actually happens doesn’t make it a bad bet.
In the market timing is both 1. everything and 2. impossible to predict without cheating.
Short term, though? Nah, you should absolutely trade on margin.
I started investing in 2020 immediately after markets hit rock bottom from COVID. Margin multiplied my gains as I bet on the market bouncing back.
You could certainly argue that I was just lucky. I could have easily been wrong and it's possible markets could have taken a longer time to recover than I expected. But tbh, the market recovered significantly FASTER than I expected.
Risking getting wiped out may be a palatable prospect if you're early in life and have the time to rebuild your fortune, but it won't be if you're risking 20 years of savings.
I only had to sell AAPL/META for a downpayment.