Smart Investor,
I have not read most of the past ten days' messages so I apologize if this is ground already covered.
I share your view that a big YHOO correction is in the works -- my own guess is 100 or more points down by year-end, maybe by mid-year. Softbank may be an aggravating factor in a future decline, but doesn't concentrating on it obscure the bigger issue, that no stock or group of stocks has ever traded this far ahead of hoped for future growth before? Let's say YHOO makes it all the way to the top of the whisper range, 25 cents. (My own guess is 24). That leaves its last three quarters at 1 cent, 15 cents, and 25 cents. Looks impressive until you realize that it's a declining growth curve. If you place the numbers in a series and try to impose a growth rate function on it, you get .01, .15, .25, .30-something for four quarters. Keep going and it takes a long time, probably at least a couple of years, to get to a buck a quarter. And yet, at a buck a quarter, we still have a PE of more than 50 even if the price of the stock doesn't go up at all. And that assumes no successful competition, no fragmentation of the portal marketplace, no AOL/Netscape or Microsoft or NBC or anyone else taking away market share.
You could pull the suspected Softbank incest out and the stock (not the company, which I think is actually pretty good) might still be properly viewed as a house of cards waiting to collapse.
Last time earnings came out, the whisper numbers were exceeded and the stock actually plunged for a couple of days. It turned out it was only refueling for a remarkable ascent, but why won't it decline again even if the whisper numbers are met or exceeded?
MAD DOG |
