Market Cap | by Wall Street Survivor

Summary

The video script from Wall Street Survivor explains market capitalization (market cap) as the total value of a company's shares, calculated by multiplying the outstanding shares by the current market price. It illustrates this with the fictional Lucy's Diner, highlighting how market cap reflects the public's perceived value of a company. The script categorizes companies into small, mid, and large cap based on their market cap size and emphasizes the importance of comparing companies of similar size, as exemplified by the historical valuation of ExxonMobil and Apple.

Takeaways

• 📈 Market Capitalization (Market Cap) is the total value of a company's shares and is used to gauge a company's size and value.
• 🧮 To calculate Market Cap, multiply a company's outstanding shares by its current market price per share.
• 💡 Market Cap reflects the public's perceived value of a company, as the market price is set by investor demand.
• 🍽️ The example of Lucy's Diner, a fictional company, illustrates how to calculate Market Cap with 100,000 shares outstanding at $50 each, totaling $5 million.
• 🏢 Companies are categorized by Market Cap size: small cap (under $2 billion), mid cap (between $2 billion and $10 billion), and large cap (over $10 billion).
• ⚖️ Market Cap is a useful tool for comparing companies, whether for qualitative, quantitative, technical, or fundamental analysis.
• 📊 Companies should be compared against similar-sized peers to make meaningful assessments of their market value.
• 🏆 Historically, ExxonMobil was considered the most valuable company for most of the 2000s, but Apple has recently surpassed it.
• 🔮 The future of which company will be the most valuable is uncertain and up to market dynamics and investor sentiment.
• 🌐 Wall Street Survivor encourages trading for free on their platform to engage with the stock market and potentially understand market cap implications.
• 🎶 The script concludes with a musical note, suggesting a light-hearted or promotional tone to the presentation.

Q & A

What is market capitalization (market cap)?

Market capitalization, or market cap, is the total value of a company's shares. It is calculated by multiplying a company's outstanding shares by its current market price.

Why is market cap important to investors?

Market cap is important to investors as it helps determine a company's size and value, reflecting the public's perceived value of the company.

How is Lucy's Diner's market cap calculated in the script example?

Lucy's Diner's market cap is calculated by multiplying its 100,000 outstanding shares by its current market price of $50, resulting in a market cap of $5 million.

What does the market cap indicate about a company's size?

Market cap indicates the size of a company. Companies with a value of less than $2 billion are considered small cap, those with a value between $2 and $10 billion are mid cap, and those with a value greater than $10 billion are large cap.

How can market cap be used to compare companies?

Market cap is used to compare companies by allowing investors to evaluate and compare companies of similar size, which can be useful for both qualitative and quantitative analysis.

Why is it suggested to compare companies of similar market cap size?

Comparing companies of similar market cap size provides a more accurate and relevant comparison, as it accounts for differences in company scale and market presence.

What are some examples of large cap companies mentioned in the script?

The script mentions ExxonMobil and Apple as examples of large cap companies, with Apple having recently overtaken ExxonMobil in terms of market value.

How has the script used the term 'most valuable company' in the context of market cap?

The term 'most valuable company' in the script refers to the company with the highest market cap, which has historically been ExxonMobil but has recently been overtaken by Apple.

What is the significance of the market price in determining market cap?

The market price is significant in determining market cap because it is the price at which investors are currently willing to buy or sell a company's shares, and it directly affects the total value of the company's shares.

How does the script suggest one can trade for free at Wall Street Survivor?

The script suggests that one can trade for free at Wall Street Survivor by visiting their website, although the specific process or platform for free trading is not detailed in the transcript.

What is the role of the public's perception in determining a company's market cap?

The public's perception plays a crucial role in determining a company's market cap as it influences the market price of the company's shares, which is a key factor in calculating the market cap.