RE:from Seeking AlphaThe problem is with the assumptions. Will they be able to take 20% of the market? Will the margins actually be that high? Compatibles are nice, but what will be different about the cannabis industry? Will there be more competition or less. Will the laws support brand recognition or not? Will the pricing go down and hurt the gross margin? Same goes for the other markets.
If I new 100% that the future would provide an ebitda of around 500M, a valuation of 4.8B might make sense. But there are literally so many risks and unknowns that are not factored in. There is no margin for error. Plus the fact that it’s valued even more than 4.8B. To invest now you have to believe this thing will double from here. That means double the projected earnings.
There is a probability distribution that this thing could in 2-3 years:
1) Go bankrupt
2) break even
3) 500M
4) 1B
5) 2B
6) every where in between
The tails are probably extremely low. The question is what are the probabilities of each possible risk and what are the outcome cash flows. From there you can establish an expected value. No one has done that. Everyone paints a perfect picture and says see this thing could be worth X in a couple years so let’s pay 2 x that price now! That’s like playing roulette and ignoring all the red slots. When it lands on black I’ll double my money! What about the risks! (Speculation vs investing 101) GLTA.