<<we are kind of getting down to "how many angels can dance on a pin", but yeah, a gorilla should trade at a 50% premium to a chimp. Get Moore's book, "The Gorilla game", best thing I have ever read on tech stocks. Intel is trading at about a 28PE because it is getting to be an old gorilla and its growth has slowed.>>
Lindybill, I absolutely agree that a gorilla deserves a 50% premium to a chimp, but I think your portrayal of Intel is incorrect. Intel has historically traded at a PE below 20, and I believe the higher PE they sport today is due to greater confidence in their ability to deliver strong growth in the future. There is no question at this point that Intel is a gorilla, and investors are paying up accordingly.
SAP is a different story, and the high PE should give people pause. They are by far the most promising in a short list of gorilla wannabees, but they ain't there yet. If they do make it, there's no question that today's price will be cheap. One possibility that concerns me, which I haven't seen mentioned here, is that the ERP business will become "bowling alley forever" as described on p. 32 of _The Gorilla Game_. "These markets never transform from niche to mass, but just continue along as a series of niches." If that happens, SAP as a company will do fine but a PE of 100 would be a tad high.
FWIW,
Mark |
