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On the contrary, a business needs to turn a profit in order to survive, and this largely limits the activities it can do to those that are economically profitab
by lottin 6y ago
On the contrary, a business needs to turn a profit in order to survive, and this largely limits the activities it can do to those that are economically profitable.
- rm_-rf_slash 6y agoRight, and like I said, if the higher ups are happy to make big investments in long-shot projects, then that is what will be done, regardless of whether or not the result is profitable. This is not unlike biomedical engineering: invest in big expensive projects expecting several to fail and a few or one to recoup the costs for the rest and then some.
- astrange 6y agoThere are alternative approaches - for instance you can be Amazon/Uber/Tesla/GameStop, who aren't profitable but are simply so cool investors just keep them running forever. However, it's possible that their investors are the actual customers and their product is their coolness expressed as shares. (Amazon is kind of messing this up by starting AWS, which is actually profitable, but the retail side isn't.)
- SiempreViernes 6y agoIs GameStop cool? I though the point was that it is not and investing is just an ironic pose...
- bhupy 6y agoAmazon Retail has been profitable since 2018 https://www.npr.org/sections/coronavirus-live-updates/2020/07/30/897271729/amazon-doubles-profit-to-5-8-billion-as-online-shopping-spikes https://www.npr.org/sections/coronavirus-live-updates/2020/0... Tesla turned its first profit last year: https://www.macrotrends.net/stocks/charts/TSLA/tesla/net-income https://www.macrotrends.net/stocks/charts/TSLA/tesla/net-inc...
- astrange 6y agoTesla's P/E is over 1000. It's almost incidental that it's actually profitable now.
- bhupy 6y agoSure, but if its stock price plunged due to massive sellout, its profits wouldn’t really change. I’m directly refuting the claim that Tesla is unprofitable. It’s in fact a sustainable dividends-paying enterprise. Perhaps a comically over-priced enterprise, but sustainable and dividends-paying nonetheless.
- astrange 6y agoI mean, it's not dividend-paying, nor is it doing stock buybacks. Aren't they doing equity raises? That's literally reducing the value of your stock. They are doing a good job paying back their bonds and their hype field is certainly repaying investors for now.
- bhupy 6y agoYou’re right; I meant to say that they can be expected by current investors to be dividends-paying at any time in the future because their economics are fundamentally GAAP profitable at this point (https://www.nytimes.com/2021/01/27/business/tesla-earnings.html https://www.nytimes.com/2021/01/27/business/tesla-earnings.h...). This is no longer an unsustainable business we’re talking about here, hype notwithstanding. Now, Uber on the other hand...
- imtringued 6y agoTesla is a company that is doing okay. I can comfortably say that it will exist in 40 years but I don't think that it will actually ever justify its current valuation. What is probably going to happen in 10 years is that investors wake up and sell their overpriced shares until the P/E is at 50 or something.