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Technology Stocks : Exodus Communications, Inc. (EXDS)
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To: Eric who wrote (1539)11/11/1999 9:54:00 AM
From: The Other Analyst  Read Replies (4) of 3664
 
Your criteria for picking winners are good ones. But I cannot agree that you should leave out the valuation number crunching. In fact, I think valuation work is even MORE useful when the situation is the most difficult to estimate. If it were easy, then many would do it and the stock would reflect the easy-to-do analysis. I think Internet stocks make fascinating targets for valuation analysis now. There IS an upper limit.

Suppose EXDS were $1,000 per share. Would you find it attractive to buy? (This is like the story about Bertrand Russell who asked his dinner companion if she would go to bed with him for 1,000 pounds. Told yes, he asked about 50 pounds. She said what do you think I am, a hooker? He replied we already established that, we're just negotiating the price.)

So if you say no to $1,000, then we have established that you agree valuation does matter. Now we just have to negotiate the price.

Maybe the way to do it is start with a vision of how much the Internet is worth 10 years out, expressed as a % of the total world economy. Then work down to sectors and leading companies within those sectors. I don't know how feasible that is, but starting with current results and trying to project forward sure is difficult.

But we do know that there are 6 billion people on the planet. and each one can only look at a screen for less tha 24 hours a day....
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