Lucent Technologies (LU) Message Board

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Technology Stocks : Lucent Technologies (LU)

LU 2.650

-2.9%

Nov 14 9:30 AM EST

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To: Chuzzlewit who wrote (12060)	1/5/2000 6:44:00 PM
From: Mr.Fun	Read Replies (2) of 21876

Chuzz, back of the envelope: At a 15% discount rate, Cisco must grow 26% in perpetua to justify its current price according to FCF valuation. At a 20% discount rate, the growth rate must be 32%. While I am untroubled by the valuation in the short to intermediate term given my projections of likely business performance against consensus expectations (again the greater fool theory) and now hold a significant overweight in the stock, I have no doubt that it is 50% overvalued for the long term. (NB. nearly every stock in the tech sector is considerably overvalued in this perspective) As I see from your profile, you too have been in this game long enough to remember recessions and bear markets. Investors like Doltan? have never had to assess valuation, because in their adult lives stocks have only gone up - gut feel has been good enough. (of course you still could get killed if your gut feel had told you to sink all of your money in PointCast or some other "can't miss" technology company, which nonetheless missed)

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