Altaba Inc. (formerly Yahoo) Message Board

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Technology Stocks : Altaba Inc. (formerly Yahoo)

AABA 19.63

0.0%

Nov 6 4:00 PM EST

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To: Bill Harmond who wrote (3748)	12/6/1997 3:10:00 AM
From: Bill Wexler	Read Replies (1) of 27307

That's a good article - and I agree with much of it. Problem is that yahoo has already discounted the "hockey stick" growth so far into the future that I don't believe the current price is sustainable for very long. I have already stated many times that it is very simple to grow sales from $1 million to $2 million...that doesn't mean it's very wise to pay hundreds of millions or billions for the comapny that achieved this amazing feat. Note that Peoplesoft - one of the examples given - had an annual run rate of about $300 million before it traded at Yahoo's market cap - it also traded not far above Yahoo's current market cap as recently as April 1997. I can assure you that Peoplesoft also had significantly more than $200,000 total operating earnings during its first two years as a publicly traded company. From June to October, Yahoo's market cap nearly tripled (a rise of $2 billion) and it's sequential revenues rose from $13.5 million in Q2 to $17.3 million in Q3. Therefore investors paid $2 billion for an extra $3.8 million in sales over those two quarters. Gee, does that mean if Yahoo comes in with $22 million in sales in Q4 that the company will be worth $5 billion? At this rate, if Yahoo achieves $100 million in sales in a quarter it will have a $45 billion market cap. If you believe that these valuations can be justified because Yahoo will suddenly produce insanely high net margins, I strongly urge you to do a reality check. Yahoo is not a free money machine, and so far their net margins have been appalling - particularly when you subtract the interest generated by the IPO loot. A high gross margin doesn't mean much when you can't bring it down to the bottom line; furthermore, Yahoo's costs will contine to increase, and price competition will heat up in a notoriously fickle business. The problem boils down to too far way too fast. I thought Yahoo was a great short at $1 billion - and I got caught in a vicious squeeze. I have a feeling that this time around things will be...ahem...different.

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