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There are two ways to price a stock: 1. On the basis of how much you expect a bigger sucker than yourself to pay for it. 2. On the basis of yield on your inve
by GianFabien 4y ago
There are two ways to price a stock:
1. On the basis of how much you expect a bigger sucker than yourself to pay for it.
2. On the basis of yield on your investment, aka dividend / share multiplied by some "reasonable" number, e.g. 15 which implies 7% interest rates.
Since there seems to be fewer gullible investors, on the basis of dividend earnings, Meta is worth exactly zero. Time to pay a dividend or burn the cash. Which to even gullible investors looks bad.
- Cupertino95014 4y agoExcellent answer. The classical answer is "the value of all future dividends, discounted to the present." #2, in other words. The expectation was, even if it pays no dividends now, when it's really successful it'll start. Or often it's #1, as you said.