Discussing the huge valuation of Uber, with Aswath Damodaran, NYU Stern School of Business professor of finance.
Aswath Damodaran: Uber driven by narrative right now
Transcript
billion. i think it’s a very narrow pricing from a couple players in the last round. i think it’s a company that’s driven almost entirely by narrative right now. it’s a story that’s waiting for the numbers to come in. and i think the story sounds really good. but i think if you put the numbers down, it’s very difficult to get up to $17 billion. i’d say even if you put the most optimistic numbers on the narrative, you get up to about $10 billion, maybe $12 billion. but $17 billion is pushing it. the real question here is you’ve got to consider regulatory risk at some point to this whole equation, right? and i don’t know how you value that. in a sense, what uber does in most cities is already legal. so you almost have to have the assumption that at some point in time, the regulations are going to change to allow them to operate big time. because they don’t change, uber’s going to have to spend a lot of money fighting these regulations in city after city to get its business going.
Aswath Damodaran: Estimate Alibaba valued at $140 billion
Aswath Damodaran, NYU Stern School of Business professor of finance, shares his view of Alibaba’s IPO. “What people are willing to pay for a company like this could change on a daily basis,” he says.
Transcript
i think the reason is alibaba aeb strengths are also its weaknesses.its biggest strengths are itcontrols 70% to 80% of allonline retail in china.and its margins are huge.those are its strengths butthose also are going to be itsweaknesses because it’s tough togrow margins when you’re already70% to 80% of the market.so i think that people need toaccept the fact that revenuegrowth is going to come down.even the 35%, 40% growth you’reseeing is going to get lower.and margins are going to shrink.but in spite of those things, ithink alibaba is worth a lot ofmoney.my estimate is about $140billion, and i don’t think thatwill change much after these newnumbers. nothing to sneeze afterobviously, josh brown. i agree with your analysis.i read your post.i think, though, when you hearpeople talk about a range invaluation of between 150 and220, which is hilarious in andof itself, i think there’s somequestion as to whether, a,they’re planning on coming intothe european market and the u.s.market.and how to discount that popepotential for growth and theother thing is retail.people don’t realize they alsohave one of the biggest moneymarket funds on the planet, andthey’re getting heavily intofinancial services which isbeyond e-retailing and has itsown potential benefits in termsof margins.could you speak to that andwhether or not that’s making itinto your calculation? i think geographical growthis going to be tough for alibababecause what makes it sopowerful in the chinese marketis it’s very in tune to thelocal culture.so it does things the way thechinese consumer likes it.and i don’t think it’s going totravel really well outsidechina.on growth within china, though,i think it does have potential.i haven’t built that potentialinto the value.but i think when you talk aboutranges, people are talking aboutranges for prices rather thanvalue.they’re looking at what peopleare willing to pay.and those ranges are alwaysgoing to be wide because whatpeople are willing to pay for acompany like this could changeon a day-to-day basis. professor, let’s steer the
