Maybe once in a blue moon a company with P/E of 500 is justified because they MAY be the next Google or Apple or Microsoft
Well, in this case a P/E of 500 would already be a massive improvement. Twitter currently has a negative EPS (aka, no profits at all), so it doesn't even HAVE a P/E.
I wonder if this bubble will deflate slowly or crash and burn like it did back in early 2000s.
Crash, probably, but not like in the early 2000s. The key difference now is that the internet is established and has multiple viable business models. Netflix has a P/E of 200, it wouldn't be surprising to see its stock price plummet from $400 to $40 (where it would then have a more sustainable ~20 P/E). But that won't change that the company is actually making money and has a profitable business model.
However that doesn't help the various startups and such that don't have viable business models, like Twitter which just keeps bleeding money with no sign of stopping.
Your comment actually demonstrates why P/E is at times kind of a dodgy metric. Do you know what will happen the minute any company (not just Twitter) which aspires to go from unprofitable to profitable changes from not having any earnings to having earnings? HUGE P/E. It's like that when you barely have any earnings, but that is not necessarily a an indication of profound overpricing.
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Well, in this case a P/E of 500 would already be a massive improvement. Twitter currently has a negative EPS (aka, no profits at all), so it doesn't even HAVE a P/E.
Crash, probably, but not like in the early 2000s. The key difference now is that the internet is established and has multiple viable business models. Netflix has a P/E of 200, it wouldn't be surprising to see its stock price plummet from $400 to $40 (where it would then have a more sustainable ~20 P/E). But that won't change that the company is actually making money and has a profitable business model.
However that doesn't help the various startups and such that don't have viable business models, like Twitter which just keeps bleeding money with no sign of stopping.
Your comment actually demonstrates why P/E is at times kind of a dodgy metric. Do you know what will happen the minute any company (not just Twitter) which aspires to go from unprofitable to profitable changes from not having any earnings to having earnings? HUGE P/E. It's like that when you barely have any earnings, but that is not necessarily a an indication of profound overpricing.