Hagstrom from Legg Mason on internet stocks, from Barrons....
Many investors are balking at the relatively high multiples of Google and other 'Net stocks. But Hagstrom calls Google, Yahoo! and Microsoft (MSFT) "valuation anomalies" -- stocks that look expensive but might be considered undervalued, given the companies' robust growth prospects. He says the three global-search engines will gobble up most of the increasing business on the Web. (Hagstrom doesn't own Microsoft, saying its hot search-engine business can't compensate for overall pedestrian growth at the software giant.) Boosted by stronger-than-expected earnings growth, Google, the world's most popular search engine, has surged 136% over the past year to 404 a share, trading at 47 times analysts' earnings estimates for next year. Yahoo! has gained 8% to 40.11, close to its 52-week high of 43. It commands a price-earnings ratio of 53. But Hagstrom predicts Google can expand its $120 billion market cap by 2.5 times over the next several years, surpassing Microsoft, while Yahoo, boasting a market value of $57 billion, can grow five times. |
