the present value of their future. But investors are rushing to lavish multibillion dollar values on some chronic money-losing companies.
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Thirteen money-losing companies in the S&P 1500 and S&P Completion indexes, including technology firms Snowflake (SNOW) and Affirm Holdings (AFRM) plus AMC Entertainment (AMC), carry lofty valuations of more than $25 billion. And that's despite them all posting adjusted net losses in the past 12 months. Analysts also think all these companies will lose money again in calendar 2022.
Seeing money-losing companies command such lofty valuations is one of the most noticeable signs of this "fear of missing out" market. Investors appear willing, in these cases, to give up the security blanket of profitability they're getting with some S&P 500 companies.
Multibillion Dollar 'Meme Mania?"
It's a banner year for S&P 500 profits. But a surprising number of companies are still in the red.
More than 40% of the companies in the S&P 1500 and S&P Completion indexes, or 1,587 in total, lost money in the past 12 months. And nearly 800 companies, or 20% of the universe, lost money not only in the past 12 months, but expect to lose money again in 2022.
And yet, some command huge valuations from investors.Some of these huge valuations are due to Meme mania, like AMC Entertainment.
Shares of AMC Entertainment jumped 3% again Monday. Strong box-office results from Disney's (DIS) film, "Shang-Chi" gave it a lift on hopes theaters are filling up again. AMC Entertainment, which lost nearly $2.8 billion in the past 12 months, is seen losing another $414 million in 2022. And yet, shares are up more than 2,300% this year — more than any other stock — due to the investment crowd expecting a turnaround. Should you buy AMC Entertainment stock now?
Snowflake: A Nearly $100 Billion Money-Losing Firm
Even Warren Buffett is getting in on highly valued money-losing firms. His Berkshire Hathaway (BRKB) is the ninth-largest owner of Snowflake, the most valuable money-losing firm.
Snowflake, a cloud computing firm, lost more than $760 million in the past 12 months. And analysts think it will lose another $54 million in 2022. Even so, the company is valued at $95.7 billion. Berkshire owns 2% of the company with a stake worth nearly $2 billion.
But Snowflake, like many of these money-losing companies, hinges on huge hopes for the distant future beyond 2022. Analysts think Snowflake will lose another $80.5 million in fiscal 2022 ended in January and $54 million in the year ended in January 2023. But they're calling for the company to make nearly $82 million in the fiscal year ended in January 2024.
Fads? Or Billion Dollar Businesses?
The whole "buy now, pay later" trend in retail is new. And it's not making money, either. But no matter: a kingpin in the business, Affirm Holdings, is already worth nearly $30 billion.
Make no mind the company lost nearly $431 million in the past 12 months. And it's expected to lose nearly another $100 million more in 2022. It has lined up deals with Amazon.com (AMZN) and Shopify (SHOP), positioning itself well for the land grab in the new area. Analysts don't think the company will make a dime well past 2024.
Similarly, online gambling site DraftKings (DKNG) commands a market value of nearly $25 billion. But it lost nearly $1.3 billion in the past 12 months. And further losses are expected until well past 2025.
Eventually, some of these money losers will turn a profit. Exercise equipment maker Peloton Interactive (PTON) is already worth nearly $30 billion, despite losing $430 million in the past 12 months. Analysts think it will lose another nearly $100 million in 2022. Here's the difference, though. Analysts think Peloton will earn more than $260 million in 2024.
But then again, if you can be worth billions and lose money, why bother with something as pedestrian as turning a profit?
Money-Losing Firms Worth More Than $25 Billion
Among those in S&P 1500 and Completion Indexes
| Company | Ticker | YTD % ch. | Market value ($ billions) | Net loss (Trailing 12 mo., in $ millions) | 2022 expected net loss ($ millions) | Sector |
|---|---|---|---|---|---|---|
| Snowflake | (SNOW) | 13.2% | $95.8 | -$760.7 | -$54.4 | Information Technology |
| Okta | (OKTA) | -1.9% | 38.6 | -534.4 | -82.5 | Information Technology |
| Peloton Interactive | (PTON) | -26.5% | 33.5 | -189 | -269.8 | Consumer Discretionary |
| MongoDB | (MDB) | 35.1% | 32.1 | -289.6 | -53.4 | Information Technology |
| Affirm Holdings | (AFRM) | n/a | 29.4 | -430.9 | -99.8 | Information Technology |
| Carvana | (CVNA) | 36.1% | 27.6 | -84.1 | -49.9 | Consumer Discretionary |
| Bill.com | (BILL) | 105.6% | 27.1 | -98.7 | -75.3 | Information Technology |
| AMC Entertainment Holdings | (AMC) | 2338.2% | 26.5 | -2,762.1 | -414.8 | Communication Services |
| Splunk | (SPLK) | -11.2% | 24.4 | -1,196.0 | -178.1 | Information Technology |
| DraftKings | (DKNG) | 29.9% | 24.3 | -1,290.2 | -632.4 | Consumer Discretionary |
| Qualtrics International | (XM) | n/a | 24.0 | -563.5 | -14.6 | Information Technology |
| Teladoc Health | (TDOC) | -30.3% | 22.2 | -763.3 | -192.4 | Health Care |
| Alnylam Pharmaceuticals | (ALNY) | 42.9% | 22.1 | -886.7 | -368.4 | Health Care |
Sources: IBD, S&P Global Market Intelligence
Follow Matt Krantz on Twitter@mattkrantz
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