Market Cappin’

Welcome to the Schmoozeletter Blog. Your source for weekly water cooler wisecracks from the world of finance. If you have an opinion different than mine or a topic you want to hear about, let me know!

This week, we’re talking about:

If you’re a whipper-snappin’, TikTok-scrolling, K-pop-loving youth like myself…

Then I’m sure you’re familiar with the lingo:

“That’s cap.”

It means: You’re lying, exaggerating, or bluffing. You ain’t spitting facts, and I ain’t buying it.

“Stop cappin’,” I often say to my fellow chums at the corner store when they say they can put fifty Warheads in their mouth at once.

But what stocks are the fraudiest frauds in the market right now?

Happy you asked. This is…

Market Cappin’

So, all of us know "cap." No cap.

But how many of us know "market cap?"

Not that market cap. Market capitalization, commonly shortened in cool-guy finance lingo to market cap. No cap.

Market cap means the size of a company.

And it is the MOST IMPORTANT FACTOR for buying a stock. No cap.

Think of a public company like a pizza. Everyone is used to shares of a company.

When you say:

“I got one slice of AAPL at $300 per share. I hope my slice goes up to $400 per share.”

Everyone thinks:

“Cool loser. Hope isn’t a strategy.”

But what you really care about is the size of the whole pie.

When you say:

“I bought into AAPL at a market cap of $4 trillion. I think the market cap will climb to $5 trillion.”

Everyone thinks:

“Oh wow, this smarty-pants knows what they are talking about.”

Because if you buy a stock at a huge, overvalued market cap, there’s a chance you bought the top, meaning your upside is limited.

If you told your skull-cap-wearing friends to buy in at a bad market cap where their upside is capped, there is a chance they turn around and bust a cap in your ass. No cap.

Who be market cappin’?

SPCX – SpaceX

Market Cap: $1.94T

That is a pretty hefty price tag. Right up there with the chip titans, Broadcom (AVGO) and TSM. Sizably more than the AI sunglass company, Meta Platforms.

Let’s compare some fundamentals:

AVGO:

AVGO is at $75B in sales and growing revenue at 32% per year.

TSM is at $128B in sales and growing revenue at 31% per year.

META is at $215B in sales and growing revenue at 26% per year.

SPCX did $19B in sales last year. Only eleven times less than META’s current run rate at a much heftier price tag.

“But what if the revenue 10x when Elon puts robots on the moon harvesting bitcoin data centers, man!”

Then it would still have less revenue than META has right now despite being much more expensive.

SpaceX…

You market cappin’!

TSLA – Tesla

Market Cap: $1.53T

What does this company do again? It is a car company with declining sales.

And an energy company that doesn’t sell much energy. And an AI company that doesn’t sell any AI, whose CEO is now CEO of a completely different Space and AI company.

And scrap those cars we aren’t selling. We’re a robot company…

Who has yet to sell a single robot.

At a $1.5T market cap, it is roughly 50% more expensive than the house that Warren built: Berkshire Hathaway.

Let’s compare net income.

Pretty close.

Tesla…

You market cappin’!

ARM – Arm Holdings

Market cap: $345B

When people say there is an AI bubble that will pop, this is a perfect example of a stock they are talking about. They are a super-sexy tech company making CPUs, GPUs, and NPUs, but the valuation?