Is Altria’s $38B valuation of Juul reasonable?

I believe JUUL is a morally bankrupt company in an evil industry.

But … smoking is an $800 billion global industry.

Could the #1 disruptor in an $800b industry be worth 5% of that? Yes. Of course it could.

And the #1 player in a very large, rapidly growing market always commands a premium. Especially from a slowly failing (but still huge) incumbent leader.

If JUUL grew 600%+ last year and has 29% market share, AND that growth and market share both continue, then you can certainly justify that price vs. the $800 billion market itself.

JUUL Laboratories Have Largest Market Share of E-Cigarettes

Also, as horrible as this is, JUUL appears to have increased smoking in teenagers, and thus increased the market size for smoking beyond $800 billion, thus (sadly) adding substantial value to an enormous but troubled market:

JUUL Laboratories Have Largest Market Share of E-Cigarettes

This is very sad. But from a go-forward business model perspective, it is extremely “promising”.

If revenue growth or market share growth stall, then it is wildly overpriced.

But in an almost $1 trillion market in huge transition, you gotta take some risk. Or become obsolete.

Still, JUUL is an unethical company and product, and it is all deeply troubling.

View original question on quora

Published on December 22, 2018

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