I don't think Keurig qualifies as a startup. Their k-cups have been around since 1998; the company since 1992.

Coffee is a consumed by many daily; Keurig is undoubtedly the most popular single-serve brew solution. It's likely that more drink a cup of coffee from a Keurig machine than wake up in a Marriot bed or turn on a Nintendo. Their users are always buying consumables; hospitality and entertainment media is typically purchased far, far less frequently. (and good or bad, Keurig's DRM is designed to help them squeeze out more licensing)

Marriot is getting squeezed by the many hospitality options and AirBnB; Nintendo is the #3 console and is getting squeeze by mobile gaming. Keurig however, is by far the most available option for single-serve in most grocery stores and in places where you buy the machines.

So yeah, in terms of many business metrics (market share, consumer loyalty and access, etc), they're not in the same realm as Marriot or Nintendo.

Mariott had $214 million net income in 2014. Keurig had $500 million.

EDIT: Mariott actually had 753m net income in 2014.

I happen to think that Keurig is worth acquiring at 28 times their trailing four quarter earnings (it might be a bit high, but that's the price of acquiring). However, you're partially mistaken on those numbers.

Marriott had $753m in net income in 2014. You're referring to just one quarter. They've done $854m in net income the last four quarters (20.8 pe ratio or so).

You're totally right - my mistake.

What you said makes sense if a company's stock price (and market cap) was correlated with the size or stability or profitability of the company. That's usually not the case though. People buy and sell stocks based on their predictions about other people buying and selling the same stocks, which itself is only indirectly based on a company's performance.

You are correct that in an ideal world, $14b sounds like a lot for Keurig, but that's pretty mild compared to other valuations (in the tech industry in particular, and among startups in particular) that we all read about every day. Apple reports record profits? The stock tanks. Amazon loses money? Hey everybody, let's double down on Amazon. Facebook's market cap is over $300b right now. $300b for Facebook, let that sink in. Twitter's market cap is currently $17b in spite of having no path to long-term stability or profitability in sight.

The one thing a company can do to improve its stock price seems to be to show growth. If there's growth, your stock is likely to go up. If there's not growth, even if you remain insanely successful and profitable, your stock doesn't stay the same- it's likely going to go down (MS in the aughts being a prime example). Investors seem to value growth (and fear the lack of growth) far more than they care about the fundamentals of the companies they invest in, at least in the tech industry.

Every market has natural forces acting on it that push it towards efficiency and rationality, but most people learn about those concepts and stop there. IMO, understanding a market means understanding why a given market isn't 100% efficient or rational in spite of those forces, and in the case of the stock market I fear that it's mostly driven by the Greater Fool Theory: https://en.wikipedia.org/wiki/Greater_fool_theory

It's important to keep in mind that Marriott International (with a few exceptions) doesn't actually own the hotel properties themselves -- they're franchises.

What's crazy about it? Given the popularity of Keurig right now, this is practically like buying a printing press from the Bureau of Engraving and Printing.