How high will Microsoft fly? Message Board

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Technology Stocks : How high will Microsoft fly?

MSFT 506.99

-1.5%

3:59 PM EST

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To: Liatris Spicata who wrote (5145)	2/17/1998 8:15:00 AM
From: johnd	Read Replies (3) of 74651

Short term investment risks with MSFT (1) Overall market disturbances: MSFT is heaving owned by large cap mutual funds, such as Fidelity Megallan. I have seen that MSFT tracks the DOW more than the NASDAQ for daily fluctuations. With three years of average 30% return on the DOW, valuations at 22PE, low dividend yield, the risk of flat or down markets is quite high. Disturbances like (the Asia crisis) Iraq, could cause short term market downfall. (2) DOJ: Dept. of justice could defocus MSFT management and consume significant management bandwidth away from productive business. Could delay or later Windows98 and WIndows NT 5.0 product plans. (3) Threat of Java and poor execution by MSFT management. (This is something that I am least worried about among the three). The current reported trailing PE of 54 is vulnerable for corrections under short term market disturbances. I expect MSFT to do $4.00+ in Calender year 98 EPS. A 5 year average PE of 35 could put the stock at 140 by Jan 99 (or 70 after split). Thus downside risk is about 12%. But excessive exuberance must be balanced with historical data. See what is happening to INTC. In the last 14 months it under performed the S&P500 by about 50%. So will we see 140 or 220 for MSFT an year from now is a function of outcomes of future uncertainities. [Full disclosure: I am long MSFT, INTC] Please argue with me on the above points. johnd

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