> How do you know the tech companies were overvalued at the old interest rates, and it wasn't just a due to interest rate changes?
Obviously I can't know one way or the other, but I laid out my personal belief in the original post. Essentially, many "tech" companies are just digital versions or existing business and products. In such cases, there isn't as much value to capture compared to unlocking massive amounts of human potential like a company like Google. The market, however, was valuing these two types of tech companies the same. Peloton is a good example. Peloton is a great product and can really make a dent in the home-gym market. But the home-gym market is already relatively mature, so Peloton really shouldn't have been commanding such insane multiples on any metric (sales, revenue, cash flow, etc.)
I think the 100's of intelligent sophisticated investors that influence the price of the market didn't suddenly start to understand the fundamentals of companies they didn't before because of a change in interest rates.
It makes much more sense they just plugged in a higher discount rate to their models.
Peloton has fallen because they went from a company with rapidly growing revenue to one falling revenue.
> Peloton has fallen because they went from a company with rapidly growing revenue to one falling revenue.
Exactly. Their growth expectations were unrealistic. They were bringing a marginally better product to a saturated market under the guise of being a tech company. They could be a good business if run lean, but they’ll never realistically command insane multiples on revenue.
Obviously I can't know one way or the other, but I laid out my personal belief in the original post. Essentially, many "tech" companies are just digital versions or existing business and products. In such cases, there isn't as much value to capture compared to unlocking massive amounts of human potential like a company like Google. The market, however, was valuing these two types of tech companies the same. Peloton is a good example. Peloton is a great product and can really make a dent in the home-gym market. But the home-gym market is already relatively mature, so Peloton really shouldn't have been commanding such insane multiples on any metric (sales, revenue, cash flow, etc.)