The Most Expensive Tech Stock in the World Today
Move over Lyft... The most expensive tech stock in the world today... Shades of 2000... Big news in 'genetic surgery'...
Move over, Lyft (LYFT)...
Our colleague Bryan Beach recently highlighted the absurd valuation given to the ride-scheduling firm at its initial public offering ("IPO") last month. As he wrote in the April 10 Digest...
Despite never having sniffed profitability, [Lyft] commanded a market valuation of more than $25 billion at its IPO on March 29.
For many of us, nothing about the Lyft IPO really made sense.
At that price, Lyft shares were trading at more than 13 times the company's annual sales.
In that Digest, Bryan noted that Lyft's IPO is just the beginning...
He explained that two other firms soon to go through IPOs – WeWork and Uber – were likely to sport even more absurd valuations. But for now, it's another lesser-known company making headlines...
On Thursday, shares of video-conferencing company Zoom Video Communications (ZM) began trading following its IPO on Wednesday evening. Shares were originally priced at $36, valuing the company at just less than $10 billion. But they didn't stay there for long...
Shares surged more than 80% during Thursday's session and closed at more than $62. The stock rose another 6% today, closing at $65.70 per share.
At that price, the company trades at nearly 50 times its annual sales... making it the single most expensive tech company in the world today, according to market-data firm FactSet. The next most richly valued company – information-security firm Zscaler (ZS) – trades at "just" 30 times sales.
Now, we should note that unlike Lyft, WeWork, Uber, and countless others, Zoom is profitable...
But this is still an absolutely insane valuation. And we aren't the only ones who think so...
Even the company's own founder and CEO, Eric Yuan, is in disbelief. As financial newspaper Barron's reported on Friday...
"What a crazy valuation," [Yuan] told Barron's in a phone interview Thursday. "To be honest, if you told me last week that the stock would perform like this, I would have said no way. But yesterday, with huge demand from investors, it was like, 'Oh my God.'"
Yuan's comments brought to mind a classic interview from the days of the dot-com boom...
Former Sun Microsystems CEO Scott McNealy sat down with news service Bloomberg in 2002, roughly two years after the peak of the Internet bubble. Here's what he had to say about his own company's absurd valuation at that time...
Q: Sun's stock hit a high of $64. Did you think what tech stocks were doing two years ago was too good to be true?
A: Two years ago, we were selling at 10 times revenues when we were at $64.
At 10 times revenues, to give you a 10-year payback, I have to pay you 100% of revenues for 10 straight years in dividends. That assumes I can get that by my shareholders. That assumes I have zero cost of goods sold, which is very hard for a computer company. That assumes zero expenses, which is really hard with 39,000 employees. That assumes I pay no taxes, which is very hard. And that assumes you pay no taxes on your dividends, which is kind of illegal. And that assumes with zero R&D for the next 10 years, I can maintain the current revenue run rate.
Now, having done that, would any of you like to buy my stock at $64?
Do you realize how ridiculous those basic assumptions are? You don't need any transparency. You don't need any footnotes. What were you thinking?
We suspect today's "investors" in Zoom, Lyft, and many other popular tech IPOs will come to a similar realization in the years ahead.
Elsewhere, tiny biotech company Mustang Bio (MBIO) almost tripled in value on Thursday...
The rally followed news that the company's breakthrough treatment had cured eight infants suffering from the so-called "bubble boy" immune-system disorder.
This is great news for anyone interested in eradicating the disease, which goes by the technical name of severe combined immunodeficiency (SCID). It affects one out of 200,000 children born each year.
These children, born with a faulty "IL2RG" gene, can't fight off simple infections that otherwise healthy children can. As a result, they're forced to spend their lives in a sterile environment, usually a plastic bubble.
Doctors at St. Jude Children's Research Hospital used Mustang-developed "genetic surgery" to restore the broken immune systems of these eight infants afflicted with the disease. Stansberry Innovations Report editor Christian Olsen explained how this works in a private note on Friday...
First they extracted stem cells from a patient, then used a modified HIV virus to deliver and insert a healthy IL2RN gene into the stem cells, and then infused the modified stem cells back into the patient.
To get the patient ready to accept the changed cells, they were given a low dose of chemotherapy to prime the bone marrow. The bone marrow is what will produce blood cells from the genetically corrected stem cells and... Voila! Healthy immune system.
This may sound like science fiction. But it's not...
Gene therapy and editing is a real and growing trend you will hear about much more over the next several years. More from Christian...
This is real personalized medicine, which is the "Holy Grail." Cells were taken from a patient and used to create the treatment.
There is no doubt we are on the cusp of more of these success stories but, remember, at this stage we (at best) have a curative potential for "bubble boy" disease. There has to be more testing, but the news is incredibly promising.
So, MBIO shot up because it's the lead dog in this treatment tech, since it licensed it to treat patients at St. Jude.
Of course, this trend isn't exactly news to Stansberry Innovations Report subscribers...
Last April, Christian launched the publication with a recommendation of a mature gene-therapy firm. As he wrote in his inaugural issue...
Gene editing and gene therapy are here...
Billions of dollars are about to pour into the sector...
Investors will make a fortune in this sector by investing in the companies that own the critical technology... We want to join them.
Analyst John Engel followed this up with a detailed subscribers-only report on gene therapy shortly after. (John also wrote an update on the implications of this trend in the March 7 Digest.)
Congrats to Christian and his team for the call. Folks who took their advice are already up 75% in a little more than a year in one of the world's leaders in the gene-therapy market.
But more important, they believe this trend is just getting started.
New 52-week highs (as of 4/18/19): American Express (AXP), Disney (DIS), Hershey (HSY), McDonald's (MCD), MarketAxess (MKTX), Microsoft (MSFT), PepsiCo (PEP), Rollins (ROL), and Travelers (TRV).
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Regards,
Justin Brill
Baltimore, Maryland
April 22, 2019