In his recent discussion with Brad Gerstner at the Sohn Conference, Bill Gurley provided an example of the absurdity of today’s valuations. Here’s an excerpt from the discussion:
Gurley: I remember one day you and I were talking about Airbnb and I just did this exam… this little study where I looked at Facebook and Google and they were trading at six times revenue. I said what does Airbnb have to accomplish to earn out this valuation that it has?
They basically would have to hit every plan for the next five or six years that’s out there, and have their margins expand to the 50 percent EBITDA margin that those two stalwarts have, just to stay even.
Yesterday in preparing for this I was looking at some of the stocks that are outliers on price to sales and Lemonade, Unity, and Palintar which have come in 60 percent are still at 20 times over sales, although the numbers are moving underneath me as we speak.
You can watch the entire discussion here:
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