FOR the uninformed, the world of Wall Street can be daunting.
Many Hollywood films portray investing in the stock market as something exclusive to the rich but that is far from reality. The investments of any person in the market can largely determine the value of a company.
If the company is promising, and therefore on hand to increase their sales and profits, their stock price, their overall market value goes up. In many lists, like the fortune top companies, companies are ranked normally according to their revenues or sales.
However, in lists like Forbes, the size of the company may be ranked according to their market value – that means generally how much the company is valued according to the market.
A company with sales of $80 billion may be valued at $30 billion only if it is not making money, or if it is perceived to be going out of favor. On the other hand, a company that is promising or growing rapidly can be valued at hundreds of billions of dollars even if it is not making money.
For over 20 years since it started, Amazon, the world’s biggest web store, was valued in the hundreds of billions even if it did not make any money on its first 20 years of operations.
For the last 20 years, the top companies have always been the most valued companies. This top spot has almost always belonged to Microsoft, then briefly Cisco, and then Google.
Right now, the most highly valued companies are Apple (over $900 billion) and Amazon (over $780 billion). Amazon is on top for doing two things right – the world’s top retail store which has disrupted so much that many malls and physical stores are closing, but also for taking the lead in cloud hosting.
Something happened also last week – Microsoft surpassed Google to be the world’s third most valued company when it hit $849 billion, compared to $839 billion of Alphabet, Google’s parent company. This is mostly because Microsoft has been gaining ground with its Azure cloud hosting, while Google continues to dominate only the search and has not been very successful in new products or offerings.
The other surprise is that Netflix surpassed Disney in valuation.
Netflix is a big video subscription service which recently hit more than 125 million subscribers worldwide. Its sales was still at $11.6 billion last year, while Disney was $55 billion. However, the stock market now values Netflix at $154 billion while Disney stays at $152 billion.
The stock market is always full of surprises, and this is one of these.