For investors, though, the rise also presents a twofold challenge. The first is to find a more fundamental way to examine growth expectations, as opposed to trying to quantify amorphous hopes for products or revenue streams that may take years to materialize. The second is to determine what that analysis says about today’s market values and the past year’s gains.
Obviously, there is no precise solution. But investors can use a back-of-the-envelope method to model what the companies’ advertising businesses may generate years in the future. And doing so suggests markets are pricing in too much growth.