Does profit still matter? | CNBC Explains

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  • Published on:  Thursday, August 23, 2018
  • What do Uber, Tesla and Spotify have in common? They are unprofitable, but still attract huge investments. CNBC's Xin En Lee explains why.-----Subscribe to us on YouTube: http://cnb.cx/2wuoARMSubscribe to CNBC Life on YouTube: http://cnb.cx/2wAkfMvLike our Facebook page:https://www.facebook.com/cnbcinternat...Follow us on Instagram:https://www.instagram.com/cnbcinterna...Follow us on Twitter:https://twitter.com/CNBCi
  • Source: https://youtu.be/PDA6nF-fxdo
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  • Rocky Hanoman

    Rocky Hanoman

     11 months ago +123

    I think this video doesn't take into consideration one important point - Corporation Tax! Corporate taxes are charged on profits - so the more profit a company declares, the more corporate tax it will pay. As such, companies try to keep their profit declarations low by fiddling with their expenses. This way they can park 'surplus money' (which usually would be considered profit) offshore through transfer pricing and other means. Hopefully, the recent reduction in the federal corporation tax rate to 21% will change this practice. But I do think the historically low profit declarations by companies has a lot to do with their desire to avoid corporate taxes - not because they were genuinely unprofitable! It's just like Milton Friedman says - high taxes distort market incentives!

  • billy bob

    billy bob

     11 months ago +109

    Just a modern version of the dot Com bubble of 2000

  • Mama

    Mama

     11 months ago +23

    I think she remembered what she wore when she got that bike.🎈

  • Mike McGlock

    Mike McGlock

     11 months ago +34

    That's because tech companies are in a bubble. For them, profit doesn't matter... it's how much debt they can take.

  • nothing

    nothing

     11 months ago +8

    I think there has just been too much cheap capital in the financial markets for nearly a decade, and these sources of capital are willing to fund long term losses.

  • Richard Coeur DeLion

    Richard Coeur DeLion

     6 months ago +5

    Forgot to mention the real reason. Quantitative Easing done by US Fed since 2008. Cheap money.

  • JY Lin

    JY Lin

     11 months ago +24

    Investors are gambling Big time these days on IPOs hoping to find the next Apple or Amazon. Only few lucky ones gonna hit the jackpot. RIP

  • Jose Aguirre

    Jose Aguirre

     11 months ago +13

    I blame low interest rates, running a deficit is cheap and pays off in the long term

  • Golden Squatch

    Golden Squatch

     11 months ago +9

    Wework just sounds like a Library with no noise. lol

  • Matous Palecek

    Matous Palecek

     7 days ago +1

    No, of course, it doesn't, instead, we're moving into a post-modernist society in which the means of production are equally distributed among the workers and hence don't care about such bourgeoisie things like sustainable self-funding business.
    Long live Stalin! (he's dead, but anyway)

  • Bris Vegas

    Bris Vegas

     11 months ago +21

    Is the USA profitable?

  • Tarzan

    Tarzan

     7 months ago +3

    Stocks are just "pass the hot potato" scam, so that's why profits don't matter.

  • Max Troy

    Max Troy

     11 months ago +2

    Focusing on growth rather than profit is largely unsustainable. Cheap money allows such to thrive. Revenue is vanity. Profit is sanity. Cash(flow) is reality.

  • SamT

    SamT

     11 months ago +5

    Investors has money to burn. As long no default, no issue.

  • Saisravan Satturu

    Saisravan Satturu

     11 months ago +10

    Only growth matters

  • Stephanie Hale

    Stephanie Hale

     11 months ago +3

    Because true and seasoned investors think long-term. They see the value in the products and services these companies offer. Uber and Tesla are here to stay as they are disrupting the industries. The other big part is the management of these companies which need to be trustable enough for the investors. Many times, investors invest in people, especially in the early stages. Uber is going public next year. I don't use Spotify, so can't comment on that.

  • MASTER BLASTER

    MASTER BLASTER

     11 months ago +2

    Who covers the losses? oh the shareholders eventually

  • vector b

    vector b

     1 months ago

    is WeWork refer as tech company? it look like we in another dot com bubble

  • Bailey Henderson

    Bailey Henderson

     10 months ago +1

    Buy shld JCP frsh instead so much cheaper than other retail companies

  • cetar bahana

    cetar bahana

     10 months ago +1

    Profit or growth.
    Investors prefer growth ??