James Bray
According to research by DataTrek, nearly three-quarters of the current valuations of the top ten stocks come from expectations for future earnings growth.
The current valuation of large U.S. technology stocks is 60% to 90% based on future growth expectations; The S&P 500 Index is about 55% (SP500), said a report in the DataTrek Morning Briefing.
For example: General Motors (GM)’s share price based on present value is 209%; Ford (F) is 140%; S&P 500 (SP500) is 45%; for Tesla (NASDAQ: Tesla) is 9%.
This means General Motors (GM) and Ford (F) are trading below their current value.
“The market views current earnings as unsustainable, and that’s entirely fair given its track record,” DataTrek co-founder Nicholas Colas wrote in the report. “Once these companies prove they can Generate significant profits during a downturn and their valuations will increase.”
But for Tesla (TSLA), this suggests that 91% of its valuation is based on future earnings, which Colas calls a “faith-based stock, as opposed to a stock valued on near-term fundamentals.”
Robotaxi Day is coming next month (August 8), and if Tesla (TSLA) demonstrates a turnkey self-driving car and provides a specific near-term timetable for its launch, the market may predict more than it does now. “Great future value” but “if the details provided are vague, then the stock is at risk of falling again.”
DataTrek provides insights into other top S&P 500 (SP500) names:
- Microsoft (MSFT) – Share price percentage based on current value: 23%; Current value (EPS/10%): $109
- Apple (AAPL) – Share price percentage based on current value: 26%; Current value (EPS/10%): $60.90
- Nvidia (NVDA) – Share price percentage based on current value: 19%; Current value (EPS/10%): $25
- Alphabet (GOOG) – Share price percentage based on current value: 39%; Current value (EPS/10%): $75.60
- Amazon (AMZN) – Share price percentage based on current value: 21%; Current value (EPS/10%): $42.20
- Meta Platform (META) – Stock Price Percent Based on Current Value: 35%; Current Value (EPS/10%): $186.60
- Broadcom (AVGO) – Share price as a percentage of current value: 25%; Current value (EPS/10%): $439.30
- Eli Lilly and Company (LLY) – Share price percentage based on current value: 13%; Current value (EPS/10%): $123.70
- Berkshire Hathaway (BRK.B) – Share price percentage based on current value: 47%; Current value (EPS/10%): $177.70
