[jeffchien]

Phenomenal timing: https://old.reddit.com/r/wallstreetbets/comments/1e6ms9z/cro...

[andrelaszlo]

I'm curious about investing and economy, and I always wonder about P/E ratios like Crowdstrike's (currently 450-something, was over 500 last week).

Some P/E ratios for today, for some companies I find interesting:

- Shopify: 615.12

- Crowdstrike: 455.70

- Datadog: 341.98

- Palantir: 212.34

- Pinterest: 187.67

- Uber: 99.0

- Broadcom: 77.68

- Tesla: 58.33

- Autodesk: 52.36

- Adobe: 49.23

- Microsoft: 37.97

What's going on here? Do investors expect Shopify, for example, to increase their earnings by an order of magnitude despite already having done extraordinarily well in a very competitive market? Can anyone ELI5?

[eschery]

Former equity analyst here. Nobody on "The Street" is actually valuing these companies on PE ratios. Tech companies often intentionally re-invest earnings back into the business in real time and so their reported EPS is often quite low and a poor metric to evaluate the underlying business on. So instead, analysts typically use other metrics like EV/EBITDA or even P/Sales ratios in their valuation models.

Very generally speaking, trading these companies is kind of more of like placing a bet on whether or not their future top-line growth will be dramatically different than the market's current expectations.

[aimazon]

The only common belief held by investors in a stock is that the price is going to go up. You may have value investors with a belief that Shopify is undervalued based on earnings, you may have investors betting that the rest of the market will buy Shopify, you may have people who’ve seen the line go up and decided to buy…

Stock prices have been decoupled from earnings or “value” for a long time now and that’s toothpaste we will never get back in the tube. We are in the Robinhood age where you can buy and sell a stock in seconds with no effort.

[blackbear_]

The greater fool theory: https://en.m.wikipedia.org/wiki/Greater_fool_theory

Essentially, investors buy as long as they think they will be able to sell at a higher price in the future, regardless of economic fundamentals.

[ab_goat]

Capture the market by not making customers pay full costs => low profits.

Grow revenues without substantially increasing costs (i.e running a loss)

Hope you can turn up the profit dial later.

Seems like the modern way?

[jhallenworld]

Stock buybacks help push these up. Buybacks are a way to pay investors at capital gain tax rates instead of normal income (dividend) rates.

[xyzzy4747]

The enterprise value is 80.58B. The gross profit is 2.5B. 80/2.5 is 32, similar to Tesla stock.

The earnings are affected by how much the company reinvests (which shows up as a cost) before it becomes earnings on the accounting sheet.

[markus_zhang]

TBH I don't think many figures here make any financial sense -- but I gotta hold it if my friends all hold it. And once everyone holds it no one is allowed to mass sell it because it's going to hurt your friends, and in finance that's a sin.

[DonsDiscountGas]

With numbers like that, either the market is crazy or the market believes the actual meaningful earnings are substantially higher than the GAAP reported numbers. Although even there the difference would have to be pretty big.

[aveao]

arm is also surprisingly high at 557.95x according to my broker btw. yet it's the only stock in my portfolio that reliably goes up.

[huhtenberg]

30-50 is a reasonable PE range for larger companies.

[shostack]

There's a lot of comments knocking the due diligence, but the call out of the threat vector and timing of this make it a bit hard to brush off as coincidence.

[mFixman]

How is Microsoft stock down less than a percent?

The problem was Windows giving arbitrary access to the kernel to software that can be updated OTA without user intervention and allowing that to crash the kernel, right? Wouldn't this mean that Windows is considerably less secure and stable than assumed?

[Vilian]

No one assumed Windows were stable and secure that's why they install crowdstrike

[didntcheck]

Not really. These were kernel modules authorized and installed by the system admin. Of course kernel code runs the risk of crashing your system. The same is true on Linux, and according to another commenter it already has happened with Crowdstrike for Linux

[krembo]

Coincidence?

[bryancoxwell]

Probably.

[ibejoeb]

That's bananas. Bro is about to get a knock-knock.

[SilasX]

He says he bought seven put contracts for $7.30 at the $185 strike. Absolute max profit, from CS going to -0, would be (185-7.3) x 7 X 100 = ~$125k.

I don’t know if the absolute amount of profit affects decisions here. It seems if he were more certain of what’s going on he would have bet a lot more.

[higeorge13]

Most timed post ever?

[spacephysics]

This smells of some inside trading. Someone internal at crowdstrike (or their relative/friend) got wind of this and is trying to save face if they get investigated.

Reading the post its obvious they don’t have a deep understanding of tech, while having that be core to their thesis.

It’s prohibitively hard to hack into a “cloud system” due to few possible entry points - as a reddit commenter said, open S3 buckets are tough to crack!

[throwaway7ahgb]

It wouldn't work, the SEC has incredible tools for finding these things.

Especially for the mom/pop investors.