Tulipomania Blowoff Contest: Why and When will it end? Message Board

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Non-Tech : Tulipomania Blowoff Contest: Why and When will it end?

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Jun 26 5:00 PM EST

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To: Sir Auric Goldfinger who wrote (1)	12/28/1998 2:20:00 AM
From: Ed Bowes	Read Replies (2) of 3543

1.) 01/15/1999 The overall fundamental backing of a stock's price is the company's current assets, as well as future assets (cash) based upon earnings potential. Most internet stocks are trading well above their assets per share. For example, Amazon.Com (AMZN) has a book value per share around $3.50. However, the stock is trading around $325 per share, leaving a price-to-book value of almost 100. In order for Amazon to maintain this stock price, it needs to have assets closer to $40.00 per share, bringing the price-to-book down to under 10. In order to sustain current stock prices, internet companies with 20-100 million shares outstanding will need to each generate $2 billion in net profits in next 2 years. This will quickly be seen as impossible by the investment community, after the holiday shopping numbers materialize the first week of January 1999. Put simply, the numbers, in terms of current and near-term assets (which will be cash from profits), will not add up and most internet stocks will decline to more appropriate levels.

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