Jess, eventually all companies should be valued based on one of the popular parameters, whether earnings, book value, ROE, valuable strategic or technological assets, etc. Concepts like number of impressions, membership, etc should be recognized based on the precept that eventually they will translate into earnings. I think its logical that one shouldn't value companies in a completely and utterly different fashion from similar companies that do not have a web presence. The flip side deals with the reflexive nature of the market where companies with large market values can improve their fundamentals by offering equity to the public or having an intelligent acquisition strategy. When most public internet companies are at similarly high valuations I don't see how an acquisition strategy would be particularly intelligent.
OTOH a couple of the internet companies will survive and their current valuation may be justified. Ergo, the statement," It is not at all clear that any of the stocks so mentioned, even the internet darlings like amazon.com truly are overpriced." may play out. For the internet companies the odds that most of the current highfliers will survive is minimal, though. Who the hell knows. What is more clear to me, though are that pinheads look at a short period of rapid growth, pull out their exponential adding calculators, and project into the future, if they even bother to do that.
Your premise that we should do so with the internet companies but should take the opposite tact with the semiconductor equipment manufacturers is of course rather illogical. I'm far from an expert on semiconductor equipment manufacturers, but I always fall back on the premise that eventually there will be a smaller number of manufacturers in semis and semi equipment due to the nature of the biz: exponentially expanding economies of scale until the point where no further technological developments can be made, the huge and growing research and development and capital investments required to be competitive, etc. When some of the second and third tier companies with questionable balance sheets and an inability to survive based on their current earnings power have been taken up near their old highs during cyclically strong periods that is a sign to me they're ahead of themselves.
One thing I don't like is statements like ,"No one can know whether companies like AMZN or NVLS are properly valued or not," and use that logic to send the companies' shares up higher. If you don't have certainty of what is going to happen in the future, one shouldn't attach a premium to the stock and value it based on the most optimistic scenario, imo.
Of course momentum investing has taken hold of the market as a result of mutual fund managers'/institutional investors' need to compete with indices and each other(which Soros touches on in his recent book), which has created a scenario where fundamentals have been thrown out the window, so neither of our arguments are particularly relevant. |
