The science of economics (pro). (8)

1 Name: Percival!kH5oK7qo82 : 2014-05-01 06:34 ID:QoHhvuSp

Thread for those who are inclined to research and learn about the economy of this civilization we find ourselves born into. Principally the stock market.

2 Name: Percival!kH5oK7qo82 : 2014-05-01 08:16 ID:QoHhvuSp

Yelp Inc. (YELP) has successfully grown to dominate a niche on the internet, a cross between the yellow pages and social networking.

2013 was a major bull market but tech appears to have stalled somewhat. It is feasible there may still be growth for tech stocks like YELP, some basic research on YELP is a good place to start this thread, it shows some of the resources I use for looking up basic info on a company.,_Inc.

latest annual report (10-K);range=2y

As we can see here YELP was particularly affected by the tech dip through March and early April, it appears that it was in a bubble which burst, though we can't jump to conclusions.

Page 36 of the annual report shows us the income statement (consolidated statements of operations), some of this information is also presented here.

They have been running at a net loss but this is apparently due to "Sales and marketing", "We spent a majority of our $132.0 million sales and marketing expense for 2013 on initiatives relating to local business advertiser acquisition and expect to continue to expend significant amounts to attract additional local business advertisers.", page 49 reveals as a percentage of net revenue sales and marketing is gradually decreasing. I get the impression YELP is maxing out sales and marketing to increase growth and that it is partly discretionary though obviously crucial for the company's growth.

At a current market cap of $4.16 billion they would need a net income of $208 million to achieve a reasonable p/e of 20, which they could not achieve even if they dropped sales and marketing. Revenue has grown by around ~60% to ~70% for 3 years. YELP is a growing company and it is uncertain how much sales and marketing spending is discretionary, but even if YELP could halve its sales and marketing spending as a percentage of revenue when it has finished expanding to achieve a net income of $200 million, it would need to quadruple revenue, which would take 3 years if current levels of growth are sustained. This is quite an optimistic estimate. If instead of halving sales and marketing spending they reduce it by 20% and assume annualized growth is 30% instead I get a figure of 8 years.

These rough estimates are within reason, I expect many speculators will be thinking "it is not too overvalued", though this stock is still very speculative at the moment.

Scrutinize and criticize my analysis here, it is far from over and I haven't reached any conclusions. I haven't looked up what other people are saying yet, just throwing this out there.

If I had to reach a conclusion I would suggest waiting for this stock to hit rock bottom or some level of support then buy the dip because speculators may still be excited by this stock, this would be a risky move however.

3 Name: Pablo : 2014-05-02 16:17 ID:9Zkvxc3I

So, what is this?

4 Name: Percival!kH5oK7qo82 : 2014-05-02 16:20 ID:QoHhvuSp

This is a forum to discuss science is it not? And what more utilitarian science is there than the science of obtaining capital?

5 Name: Percival!kH5oK7qo82 : 2014-05-10 05:53 ID:QoHhvuSp

In March and April the tech sector stalled and many bubbles burst, this may have dragged down a few innocent companies with it, that may now be excessively undervalued and bounce when investors realize the error.

FEYE is a possibility, also GOOGL. I've had a little looke at FEYE prompted by a thread in /biz/ that may still be up

> David DeWalt, FireEye chairman and CEO, says he's focused on growing the business and discusses how the market digested the company's quarterly numbers.
> DeWalt's optimism didn't satisfy Brian Kelly of Brian Kelly Capital who had recently sold a losing position in FireEye.

Who is right?,_Inc.

annual earnings report for 2013, filed 2014-03-03;range=1y

at a glance I believe it is likely to be undervalued and might bounce, it was between 35 and 40 for much of 2013 before the bubble, I am currently trying to digest their annual earnings report and trying to understand more about the profits and expenses of the company, revenue and gross are growing and net loss is not unusual for a growing company, however I need to learn more about the company and how discretionary their R&D and sales and marketing expenses are (which increased in proportion to gross profit from 2012 to 2013) before jumping to conclusions

6 Name: Percival!kH5oK7qo82 : 2014-05-10 06:57 ID:QoHhvuSp

> FireEye Reports Financial Results for First Quarter 2014

7 Name: Percival!6ytVDvPN/E : 2014-06-22 00:42 ID:ap1OkolF

I use it to gain power in general, power gives you more options whatever your motivations. You might want to become biologically immortal, you might want to help alleviate suffering, but you can't do any of this without wealth or power.

Knowledge is useless if not wielded by the wise, and I am aware there is more to it than that. There is a kind of information economy, you need information about information to determine the chances of it being useful in the practical sense which presents an interesting dilemma, since now you also need information about information about information about information, there are some parallels with calculus, this sounds like borderline autism but I am not obsessed with this or anything, it is just an observation I have made, when it gets to this point I usually just rely on good old human common sense and approximations to make the best decision. For instance if I am looking up penny stocks and I come across a dodgy company dumping millions of shares on the market with red flags everywhere when I go to their site, I know there is no longer much point in me spending more time on this, I go to the next one. If I next find a biotech startup and there are no red flags I have to decide whether it is worth trying to understand the drug they are trying to develop myself, I have to try and determine how long it would take and the opportunity cost of spending time on it or researching more companies. Through these means I can figure out how to make reasonably effective use of my time, how to valuate companies, risk and returns and the opportunity cost of various options.

So you can see there is what can be described as decision theory or economics, I understand all this and enjoy doing it, I have sort of gravitated towards this way of looking at things and judging the value of things independently.

8 Name: Anonymous Scientist : 2014-07-27 08:17 ID:WnTlBeHM

What if I told you that economics is a pseudoscience, and that all the phenomena you're trying to model in such painstaking detail are random chaotic herd behavior?

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