đź”’ Boardroom Talk: Today’s Big Question for investors: How to value those ‘Exponential-No-More’ stocks

LATEST ON BIZNEWS RADIO: SA’s new test case for Coalition Government – Retief Odendaal of the DA, now NMB Exec Mayor after 10 party coalition ejects disastrous ANC/EFF administration. (For Spotify, click here)

As Tuesday’s big BizNews Portfolio restructure approaches (click here to register), the overarching theme is what to do when an Exponential Company loses that title. Exponentiality requires high double-digit growth. Embed that into spreadsheets and the results over time are spectacular. Ditto the ratings of stocks in the underlying companies.


But when it reverses, the market’s reaction is brutal. Take Netflix. Its shares started the year over $600 a share. Numbers for the December quarter disappointed. Some immediately bailed, the share price immediately dropping $100 a share in the wake of the report. But some kept faith with a management which said the reverse was temporary.

Three months later, financials for the March quarter confirmed the smart money’s suspicions that Netflix’s exponential growth was indeed over. The price took another big hit and despite an uptick after better June numbers with revenue growing again (but only by a modest 8.5% yoy) the shares now trade at well under half the level where they started the year ($236). The critical point is Netflix’s “exponential” growth days are over.

The same argument could be made for other FAANGS with the exponential moniker like Amazon (revenue growth now 7%); Apple (2%) and, especially, Meta (formerly Facebook) whose revenue actually fell in the June quarter. Meta’s market cap is still a lofty $400bn, or 20 times net income. That’s an exponential rating. Not one for a business now contracting.

More for you to read today: 

Putting our money where our mouth is – 36ONE’s Cy Jacobs
From the fourth BizNews Conference Cy Jacobs offers insight into his asset management firm 36ONE. An investment team he has personally built over 18 years. Jacobs also offers his take on the performance fees debate and how they play a part in the group’s hedge funds.


As a Premium subscriber you are entitled to full membership of wsj.com (normal price $29 a month). Be sure to action your access through the Premium link on the BizNews website. Because of The Wall Street Journal’s credential requirements, be sure to create a password which has at least 8 characters and includes at least one letter and one number – NB it MAY NOT contain any special characters (ie #, !, @ etc). To maintain access to WSJ.com, you MUST enter our partner’s website via Biznews Premium at least once a month. A final PS, if you had previously signed up for WSJ you’ll need to clear the cookies from your device. Our helpdesk can assist â€“[email protected].

Visited 87 times, 1 visit(s) today