Irrational Exuberance Expectations And Valuation Analysis

Today we will have a close look at 4 stocks that have shown price action that does not actually make any sense from a very strict fundamental analysis, proving that many times stock market is irrational and driven by emotions and strong behavioral finance.

Twilio Inc.(NYSE: TWLO)

An IPO this year with losses and negative EPS last 11 quarters, Operating Margin (TTM) is -14.87%, Net Profit Margin (TTM) -14.99 %, negative Free Cash Flow during last 2 quarters. Initial IPO price was $15 per share, went up to $70 per share now is trading at almost $30 per share. Wondering who really bought at $70 per share?

(Click on image to enlarge)

TWLOc1dl0611.png (700×340)

Tesla Motors, Inc. (NASDAQ: TSLA

(Click on image to enlarge)

TSLAc1dl0612.png (700×340)

Tesla Motors Inc revenues grew 26.50% in FY 2015 as compared to FY 2014 to 4.05B. Net income fell 202.23% to -888.66M. Operating Margin (TTM) is -11.15 %, Net Profit Margin (TTM) -14.74%, losses again. Recently Tesla completed the acquisition of SolarCity Corporation (NASDAQ: SCTY) for $2.6Billion, a company again with losses. And Tesla recently made a nice rally of about 15% up from $180 per share to $208.79 per share. 

Netflix, Inc. (NASDAQ: NFLX)

(Click on image to enlarge)

NFLXc1dl0612.png (700×340)

The current PE Ratio (TTM) is 338.16, Operating Margin (TTM) is 3.49%, Net Profit Margin (TTM) is 1.99%, yet a negative Free Cash Flow during all last 4 quarters; the stock went up to $130 per share and found buying interest on a dip around $112.50, now is trading at $125.12 per share. Is it a bargain with such a high P/E ratio and a negative Free Cash Flow? 

Nutanix, Inc. (NASDAQ: Stock NTNX)

(Click on image to enlarge)

NTNXc1dl0613.png (700×340)

Another IPO this year with issue price of $16 per share, went up to almost $40 per share now is trading at $29.41 per share, having negative EPS last 10 quarters, Operating Margin (TTM) is -50.43% and Net Profit Margin (TTM) is -55.75%


The stock market is often irrational and does not make sense from strict fundamental and valuation analysis points of view. All these 4 stocks have shown price actions that are very hard to justify. Losses yet are going up, or very high P/E ratio still goes up. But prices are very often lead by emotions and logic may not always be present. Let’s wait to see what 2017 will bring for stock market investing with a new US presidency and many challenges. Irrational exuberance, expectations, and valuation analysis, or technical analysis do not often make it easy to understand and justify.

How did you like this article? Let us know so we can better customize your reading experience.


Leave a comment to automatically be entered into our contest to win a free Echo Show.
Alexander Hamilton 5 years ago Member's comment

The market has been running on emotions since Trump won / lost. We will pay price in 2017 when the S & P will be flat to down because we moved 8.5 % in one month!

Chee Hin Teh 5 years ago Member's comment

Thanks for sharing