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Valuation

Has Metcalfe's Law Stopped Working for Bitcoin?Metcalfe's Law has been successfully used to value a variety of network effect technologies and businesses, including Facebook and Tencent. Applying Metcalfe's Law to Bitcoin , using "Daily Active Addresses" (DAA) as the "n" value, yields interesting results. Historically, Bitcoin has tracked the Metcalfe Law Fair Price reasonably well. A number of studies have been performed over recent years which validate this and have used various derivations of Metcalfe’s Law. Note: this indicator sticks to the original Metcalf’s Law. Prior to 2018, every time Bitcoin was above the Metcalfe’s Law fair price (calculated using a default “A” of 0.5 here), a bubble had formed, and price quickly reverted back down to the mean. Nonetheless, since February 2018, Metcalfe's Law Fair Price has remained below the actual Bitcoin price, suggesting Bitcoin is currently overvalued. There may be a few reasons for this: 1. Possibility A: Bitcoin may still be extremely overvalued. Since the December 2017 peak, Bitcoin has only reverted to the Metcalfe’s Law Fair Price briefly during the December 2018 bottom. If this case is true, there could be further to fall unless DAA numbers pick up to fill the gap. 2. Possibility B: The introduction of side-chains, private transactions and the Lightning Network may have fundamentally altered the effectiveness of using DAA to value Bitcoin . As more daily transactions are completed off-chain, or on large platforms/exchanges which use fewer addresses, the relative number and growth of DAA may be misrepresented and artificially low. In this case, DAA as it is reported today is no longer useful in assessing the fair value of Bitcoin with Metcalfe’s Law and this Indicator is effectively useless. 3. Possibility C: Neither of the above are true. We are just in an anomalous period in which price and Metcalfe’s Law Fair Price have deviated from the mean for an extended period (and will meet again in the future, potentially at a higher price). 4. Possibility D: Metcalfe’s Law doesn’t really work for Bitcoin . I am inclined to believe Possibilities “C” and “D” are unlikely. Given the way Bitcoin infrastructure is being developed and used in 2019, Possibility “B” seems the most likely, as this case is supported by the fact that a number of other metrics indicate that Bitcoin is currently on the lower side of “fair value” (including Dynamic Range NVT Signal). If Possibility “B” is false, or the impact of private network address usage is negligible, the Bitcoin network may not in a healthy state, with DAA values basically flat for the last 3 years. Regardless, Possibility “A” remains a candidate. Only time will tell. It will be interesting to check back on this indicator in 12-24 months time. Hopefully this indicator has been proven redundant by then.
BNC:BLX
by capriole_charles
3
Dynamic Range NVT Signal for Long-term Bitcoin ValuationABOUT DYNAMIC RANGE NVT SIGNAL NVT Signal (Credit: woobull.com) is akin to a "PE" ratio for Bitcoin, and can be used to identify when Bitcoin is overbought or oversold based on the relative value of transactions sent across the network. This indicator includes a 2 year moving average and standard deviation to identify outlier values, instead of declaring a static high-low range for relative valuation. THEORY A dynamic "high-low" range was chosen for the following reasons: - Bitcoin is only 10 years old, it is likely that relatively "high" and relatively "low" NVT values will change with time, as have PE ratios over the last century. - Some transactions are now made off-chain (eg. Liquid Network's private side-chain which is used by many major exchanges). If this trend continues, we can expect "normal" NVT ranges to increase with time (as the relative portion of public on-chain transaction values decreases). CALCULATION - NVT = Circulating Market Cap / 90 average On-chain Transaction Value* - Overbought (default): NVT > 2-year mean + 2*standard deviations. I.e. NVT Signal is in the top 2.5% of values for the prior 2 years. - Oversold (default) NVT < 2-year mean.** *Data source: Blockchain.info, estimated transaction value does not include returned to sender as change. **Oversold under 2-year mean was chosen due to the skewness of NVT Signal, it is not quite normally distributed. For example: NVT Signal has never been less than the 2-year mean - 2* standard deviations. This may change in the future. NOTES ON USAGE - Use with care. Bitcoin can remain "overbought" or "oversold" for extended periods (eg. 2015-2016). - As Bitcoin ages, the validity of NVT Signal will need to be monitored. Particularly with respect to potentially increasing use of side-chains, private transactions and potentially the lightning network. - It is likely that a 2-year “look back period” for calculating mean and standard deviation will not be sufficient in the decades to come. As Bitcoin matures and stabilizes (some time in the future), a longer "look back period" should probably be used. To allow for this, the defaults for this indicator can be easily adjusted.
BNC:BLXLong
by capriole_charles
20
UNH insider sales flash a warning sign ahead of earningsUnitedHealth Group has had an incredibly strong showing this year, and right now it's priced pretty attractively at oversold level on the hourly chart. On its daily chart it's at RSI 38, nearing oversold (RSI 30) but not quite there yet. It also hasn't yet tested its August low of 220.78 or its one-year lows of 208.07 and 216.84. I suspect we'll get a bounce tomorrow from the hourly oversold level, then fall some more to the 216-220 range. At that point we should be about oversold on the daily chart and should bounce into earnings on October 15. The average analyst price target on UNH is about 299, implying about 33% upside from the current price. Analyst estimates of UNH earnings have held steady for the past month at 3.77, significantly better than 3.41 the same quarter last year. UNH has an 8.7/10 Equity Starmine Summary Score rating. So most signs are bullish. However, company director Richard Burke sold 10,000 shares last week. Other directors also recently sold thousands of shares. All this insider selling doesn't inspire confidence for good earnings this quarter. On that basis alone, I don't think I'd hold this for anything more than a pre-earnings bounce. On the other hand, insider sellers may be responding to political risk rather than to the company's financials. The healthcare sector is expected to report good earnings this quarter, which could make it attractive as a defensive play in an earnings recession. Healthcare is a defensive sector that usually does well when the rest of the market is down. Right now healthcare stocks are cheap, which makes them even more attractive. However, with Elizabeth Warren leading the Democratic pack, UNH's share price may continue its breakdown. Health insurance and pharmaceutical companies are at particular risk from Warren's "Medicare for All" plan, and you may be able to chart healthcare stocks' performance from now until the election as a function of Warren's popularity in the polls.
NYSE:UNH
by ChristopherCarrollSmith
How to Set Fair Value Crypto Price Targets Using Basic AnalysisMost people here are reading a bunch of charts and that's fair, but if all you understand are charts then you won't understand the most critical, basic elements of how to fairly value a cryptocurrency. Don't fall for some of the nonsense that others propose as guidance for how to invest in cryptoassets. These people are obviously ignorant clowns here to entertain you rather than help you invest in a sound, reasonable way that will guide you towards a meaningful long term position with cryptoassets in your portfolio. The first valuation method I propose is extremely simple and extremely accurate. It is simply a relative valuation based on Bitcoin market cap. This is a simple way to find arbitrage opportunities in the market. By using Cryptocompare's USD Coins List you can see sort coins by "Market Cap". In general this can be assumed accurate with the exception of pre-mined and/or highly dubious coins with structural centralization features such as XRP and Dash (although you'll probably be So if we're looking at Bitcoin's market cap at this moment, it is $118.5 B. Looking at Litecoin it is $7.03 B. $7.03 / $118.5 = .05932 So Litecoin is 5.932% of Bitcoin's market cap. Bitcoin price is $7033 (might be slightly off here) at the time that market cap was $118.5 and Litecoin price $127.50 0.05932 * $7033 = $417.20 Since Litecoin has a higher coin emissions curve and a higher supply than Bitcoin then we need to adjust the valuation based on the coin supply. You can look up the coin supply by going to the individual coin's page on Cryptocompare. Litecoin is at roughly 55,097,000 (55 million or so) coins (I'm doing this off memory and it changes every 2.5 minutes) Bitcoin is at 16,849,775 coins. Dividing Bitcoin's supply by Litecoin's to get the "coin supply ratio" : 16849775 / 55097000 = 0.3058 So Bitcoin is about 30.58% of Litecoin's current supply. Since Litecoin is creating coins 4X faster than Bitcoin but started 2 years later, over time this 30.58% ratio will move towards 25%. I'm not going to do the math there but you can figure out the rate of change pretty easily but essentially, that number will decline over time. So in the case of Litecoin there is a slight discounting effect that happens over time due to the declining "coin supply ratio." So we can then take our $417.20 * 0.3058 = $127.58 Note that for example with Bitcoin Cash that the supply is identical so you don't really need to do this step. And for coins that have less supply than Bitcoin you would use a "coin supply ratio" that is greater than 1 so that the lower supply has a multiplying effect on price. And amazingly enough, this is what the market is more or less asking for Litecoin almost to the penny. If we take into account: coin emissions rate differential and coin market cap relative growth then we can VERY easily find arbitrage opportunities by setting targets for when we see divergence from the market price and what should be fair value. I will save this discussion for another time but you can pretty plainly see how a coin that has an expectation of doubling its market cap in relation to Bitcoin will have a high probability of increasing its value/price by a factor of 2. So then it becomes a matter of measuring/filtering for the rate of change in relative market cap as that is one of the central influencing factors to find coins that are "on sale" at least until their metrics change. I won't get into that here, but it's generally easy to intuit with knowledge of the overall crypto market but not that hard to put in concrete numbers either.
by powderpc
2
Tesla Motors long term valuation multiples are declining fastTesla is difficult to value and the opinions are very strong on both sides of the argument of how TSLA is valued. The valuation is dropping fast, that is for sure. Given how sales have skyrocketed from nearly zero to $3 billion has dropped the PSR from over 20 on a few occasions to under 10 for this year 2015. Tesla is losing money as they invest in their business, grow infrastructure, build supercharger stations and provide unparalleled customer service, and build capacity to keep driving down the cost of building a Tesla. If you look at the long term, in this case 57+ months (since that's how much data we have on Tesla so far), and if we assume sales can keep growing at the rate they are growing, then TSLA will be very cheap in 4.6 years. We could give Tesla a PSR of 2 after 4.6 years, then the stock would easily be a double from it's current levels, which is a 15%+ return per year. I added the "half-speed" trend line for TSLA to now because it encompasses when TSLA first started selling the Model S up to the peak price for TSLA shares over $290 last summer. If we look at the pace of the trend from the mid-point of that advance, then TSLA is still on track and that level was tested in the recent pullback earlier this year. The current news about guiding down production from 55,000 units per year to 50,000 together with the recent "hacking success" into Tesla cars, should provide another buying opportunity over the next weeks and months. Cheers.
NASDAQ:TSLALong
by timwest
17
SCTY: Bottom or bust?On an absolute level, the price of SCTY -0.61% has declined to around 80% of its all time high. The question then becomes: is company's equity price going to stabilize at this level or is this the calm before the storm (a path to zero)? The company has a great story and in the eyes of many a visionary founder and ceo at the helm. The proposed merger may be partially attributable to the downward slide in the price of its equity . I believe in what they are doing and have confidence in the net benefit to all stakeholders - even shareholders for pushing forward with this vision of the future. However,this should not detract from the problems the company may or may not be facing and understanding if there is a value from purchasing equity at current price levels. I intend to answer this question from both a fundamental and chart perspective. On a fundamental valuation, I will stick to the process Prof. Damodaran (NYU Stern) uses in determining value. The intent of this analysis will be to determin a view on trading/investing in this company for a long term holding (+6 month). If both views show a basis agreement, it would be prudent on my part to put my capital to work on those findings. From a chart perspective, my opinion is a sell - and that has been the case for the past couple of months when looking at a weekly price trend. However, a monthly price chart will reveal the share price has been knocked down to relative lows and nearing ranges not since it IPO'ed. From that view it would be time to start considering opportunities, if they present themselves to go long, and seeing if the trend manages to reverse. Initiating shorts may less fruitful now given that the price drop has panned out in terms of magnitude and time. I will update this in some time to include the valuation based on the fundamentals.
S
by prcruz408
PGC: Cheap valuation, strong accumulation, ready to fly$PGC is offering an amazing buy signal here. We have a potential explosion pattern building, and if we break above the key earnings resistance above, we could see the 22.36 target get hit in the intermediate term. I'm already positionied in this stock, and looking to add once we break the resistance. For now, you can jump in at market and add aggressively above 20.85 using the same stop loss. Valuation for this company is very cheap, and they are profitable, which gives way for a perfect technical and fundamental trade. Good luck! Ivan Labrie.
NASDAQ:PGCLong
by IvanLabrie
GILD - Valuation bargain, but technically awful. Future BUY NASDAQ:GILD has been a great investment and I believe it will continue to be a good company to own long term. The valuation using multiple methods is outstanding compared to it's peers. Fundamentally, the question has been regarding future growth. GILD will have to find new ways to generate future sales growth to replace the expected slower growth from it's hep C blockbusters. Investors are concern GILD could be a value trap. Even with the questions about future growth, this stock seems crazy low compared to it's peers. From a trader's perspective. Price action is awful and it may stay bearish for awhile. I don't see a favorable long swing trade entry at this time, but this sell off will get over done. I plan on also evaluating my "investment options". One possible option to consider is a buy-write around $80 - 78. Options are currently selling at discount, so ideally I would like to IV go up to sell them a a premium.
NASDAQ:GILD
by JLJ002500
Walmart -WMT -Oversold & Valuation Compelling at 0.50x's SalesWalmart has bottomed consistently at 0.50x's Sales since late 2012, with each swoon holding perfectly at that level. Given the size of Walmart and the breadth of shareholders and analyst coverage, it is logical that investors have stepped in and defined a specific level of valuation for which they will continue to buy shares. I have done this analysis in GM shares too. Look for the link below. On Friday, I published a chart, but without going into the specifics of this 0.50 level of PSR, so I am producing this chart again with this additional detail. The ENTRY here is right in the middle between the upside target of 0.55x's sales and the base at 0.50x's sales. Therefore, the risk is equal to the reward. But what would make you want to take even odds is that the probability of reaching the target is greater than reaching the support. Why? Because the chart has been coming down steadily and the overall market, as measured by the S&P500, has gone on back to the all time highs. There is a divergence here that spells an opportunity. I love to buy technically ugly and oversold charts when the valuation is compelling. The stop loss I listed before would have had you selling right at the key 0.50x's sales level, which isn't logical, so I am amending that and I would suggest adding to this position with a stop at 72-71 instead of at 75. The trade becomes more and more interesting as the price drops to the $75 level because the upside becomes 10% instead of 5% and the risk remains low. Earnings are due on 5/19 and that may raise the level where the 0.50x's PSR level is, so pay attention closely this coming week. All the best, Tim Saturday 10:49AM EST, May 16, 2015 WMT 79.24 last.
NYSE:WMTLong
by timwest
5