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Technology Stocks : AUTOHOME, Inc

ATHM 23.43

-2.1%

Nov 26 3:59 PM EST

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To: Cynic 2005 who wrote (10897)	6/9/1999 5:59:00 PM
From: DOUG H	Read Replies (1) of 29970

<<<<<A rise in interest rates can cause stocks to decline because higher rates decrease the current value of all future net income at a company. However, this might not prove accurate with Rule Breaker-type companies that have high amounts of cash. In fact, higher rates might increase the value of future earnings by increasing actual earnings. An upward tick in interest rates could prove a good thing for a company like America Online (NYSE: AOL), with $2 billion in cash and equivalents, or Amazon.com (Nasdaq: AMZN), with over $1 billion. Many new companies, especially those that recently came public, have large amounts of cash and little debt. Being cash-rich, higher interest rates would mean higher interest income. Analyst Keith Benjamin of BankBoston Robertson Stephens said today in a Reuters interview that higher rates should actually inflate his earnings estimates for certain cash-heavy companies (such as AOL). >>>>>>>> Mohan, After posting to you I realized that for that assertion to be true, the Co. in question would have to generate a great deal of additional interest income to offset the effects that raising rates would have on the same company's revenue. And in addition it would decrease the present value of any cash/ST securities presently held at what we can only assume would be lower than current rates. I would agree however that the effects are more dramatic for highly leveraged companies thru bank lines which are often at adjustable rates or are reviewed frequently. I think that is the point that Ah has been trying to make as well. Thanks for helping me think. D.H.

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