PSFT - 1999: The "Make-It-or-Break-It" Year? Message Board

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Technology Stocks : PSFT - 1999: The "Make-It-or-Break-It" Year?

PSFT 0.0001000

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Oct 29 5:00 PM EST

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To: Michael Burry who wrote (186)	3/8/1999 2:20:00 AM
From: Chuzzlewit	Read Replies (2) of 1274

There are multiple issues here, and the most important one is what the long-term earnings outlook appears to be. Clearly, we are dealing with an industry-wide slow down. But the important questions are these: 1. Is the slow down a reflection of a saturated market for S&P500 companies or is it the result of a diversion of IT funds for Y2K remediation? 2. Can PeopleSoft's offerings be scaled down to compete for smaller firm's ERP requirements? 3. Can PeopleSoft transition itself into the SCM and front office offerings? Merely placing a $10 price target without addressing these and related issues is pointless. The second major question is one of valuation methodology. It is difficult to imagine a $10 valuation placed on a firm with the expected earnings that PSFT has. If you believe that the S&P500 has a sustainable growth potential of around 11% per annum, and is trading at a forward P/E of nearly 30 it becomes pretty difficult to justify a $10 target for PSFT based on comparative fundamentals. With the more pessimistic expectations for earnings coming in at around $.70 for the year it is hard for me to imagine this stock trading at a forward P/E of less than 14 given the earnings growth projections of around 25%! TTFN, CTC

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