Dwight:
<<I also breath a lot of air, but I don't put stratospheric values on oxygen-supply companies.>>
Great post! I agree that internet valuations are far removed from any reasonable valuation. AOL, YHOO, et all might replace Wal-Mart, Nordstrom, Daimler-Chrysler, NBC, etc. and become the only distribution system that matters in the future. I doubt it, but the market certainly bets as if this is a foregone conclusion.
Unfortunately, assessing the market valuation of these companies is not what the market is currently focusing on. In the end of the day, stocks are worth what the next guy is willing to pay for those pieces of paper. And since the next guy for the most part has little interest in valuing businesses, internet stocks really do become lottery tickets with infinite valuation possibilities. Perception is what matters now, not valuations.
Look at AOL as a case in point. The current business of providing access is actually a low margin/ loss leader operation. But Wall Street doesn't care about that business, because they are drooling over the perceived high margin business AOL gets from selling internet real estate to other start-ups. Run out of real estate? No problem. Simply add a "channel" to your service and sell more. This is the essence of perception, and a story that can literally build castles to the sky.
So, the question I have for everyone on this thread. What possible events can change the perception of limitless e-commerce profits? SEC investigation? Encroachment by established brick and mortar companies? Potential de-listing due to inadequate capital?
So far none of these have worked. What new event(s) will change perception, or what will cause the little guy to grow more fearful than greedy? This is the million dollar question.
Regards,
JC |
