Olu - it's my belief that at some point in time, internet companies will be valued using the same financial principles as non-internet companies. Actually, one could argue today that there are fewer and fewer 'non-internet' companies - as every company seems to have at least some sort of web presence. And so, it seems then, that the only thing that really delineates internet companies from non-internet companies is one simple assumed fact: 'internet' companies are those companies that do business only over the web. But of course, this definition is breaking down, as well - case in point: Amazon building warehouses.
So what is an internet company? We can answer the question today pretty easily by pointing to the companies that everyone recognizes as being 'internet' companies (AOL, YHOO, EBAY, AMZN, etc.). However, I would say 12-24 months from now, the answer will not be so clear - if Wal-Mart gets their web site revamped this year and they do $1+ billion in sales over the web next year, will we call Wal-Mart an internet company? And if there is a time when all companies are internet companies, we'll have to ask ourselves why some companies have PE's that are in the stratosphere (or negative in the case of Amazon) on slim profits, and other well-respected and highly profitable growing companies have PEs under 50 - and I don't think there will be a real good answer.
But, in essence, you are correct, it is foolish for me to believe that in today's market internet companies should be valued on fundamentals - and to date, I have let such foolhardy beliefs lead me to money losing stock trades on more than one occasion.
Thanks,
-Eric |
