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Technology Stocks : Altaba Inc. (formerly Yahoo)
AABA 19.630.0%Nov 6 4:00 PM EST
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To: Bill Harmond who wrote (6525)1/15/1998 8:59:00 AM
From: Oeconomicus  Read Replies (2) of 27307
 
...sleeping soundly...buy on weakness and put it away.

What's that I hear WH? A note of complacency.

I have to admit that growth in revenues, number of advertisers (is each product or service from one company a unique advertiser?) looks good, but this thing is priced as if much of the costs are fixed and new revenues would flow straight to the bottom line. Even Alomex The Tulip Bull sees that costs are rising nearly as fast as revenues. Any margin improvement will come slowly and little or none is expected by the company for the first half of this year.

Let's say they do $200 million this year (almost 200% revenue growth!). Let's say operating margins rise to 7% by Q4 (generous I think based on the conf call) compared to 5% now (give them 6% for the year). Let's say they still manage $1 million of interest income. Now take out 20% in taxes and you have $10.4 million or 19 cents for 1998. That gives them a forward PE of 353 (and forward price to sales of 18, Peter F.)

Now, how many people think that they will triple revenues? How many people think they won't increase the share base to (try to )do it? How many people think they won't dip into their cash horde (for the MCI venture and otherwise)? How many people think "nonrecurring costs" don't recur?

Ok, still not satisfied, people? Then let's say they do $300 million and get margins to 8% plus $1 mil of interest or $25 mil pretax. And they don't dilute the shares at all. That comes to 37 cents per share for a veeeeery reasonable 181 PE and 12 PS.

How many years out do you have to go to make the stock worth $67 then, let alone now?

Bob
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