>Real quick and dirty, I believe AOL is commanding about a 50-60 multiple, eps estimates for cy 1998
vary, avg. around 1.25 or so. That gives us on an earnings based valuation around 60-75 dollar target,
which we're floating at right now. I'm long term, but I really don't have a choice in the matter...
This brings up a good point. What are the timeframes for most people on this thread. Hours, days,
weeks, months, years? Just curious if all the bears are traders or long term investors.<
I appreciate your candidness. It shows that you are not just one of the web throngs. Assuming we agree on earnings, here is where we disagree. I would not give a 50-60 muliple to a risky company with a 5-year growth projection of 46%. Although Coke got to a ridiculous valuation, a case can be made that companies with more certain growth, like Coke, deserve higher PE ratios relative to their growth (I refuse to say PEG, whoops). On the other hand, riskier companies deserve lower PE's relative to their growth. The thing that bothers me about this tech market is that people seem to want to pay, instead of being paid, for risk. In a more reasonable market, AOL would have to trade at a much lower PE ratio given its risk, and that is even assuming that one accepts the rosy growth scenarios.
One last question to the bulls? Do you guys see the risk in AOL as a positive that should be rewarded with a higher stock price, do you not care about risk, or do you feel you have discounted appropriately for it? Thanks.
Oh, to answer your question, I am in it for the long term. I stopped viewing this board because it became a discussion about the use of put options. Unless a person has the patience and guts to potentially throw good money after bad reinitiating positions at expiration, IMHO, puts are NOT the way to go. Then if they willing to do that, they must really believe in the bear case, and if they do, why pay the put premium when you can just short the stock. My warning: just short a little at a time. A little at 70, 80, etc. I think AOL will tank again sometime, but I am afraid my fellow bears will have already squandered all their risk capital on puts. |
