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Technology Stocks : Altaba Inc. (formerly Yahoo)
AABA 19.630.0%Nov 6 4:00 PM EST
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To: Money Maker (MM) who wrote (21146)4/8/1999 6:24:00 AM
From: J.S.  Read Replies (2) of 27307
 
MM, Sure I understood what Eugene wrote. High P/E ratios like 100 always need to be justified by accelerated earnings projections. Think about it. We could start a company that only simply buys municipal bonds or treasuries and always guarantee investors 4 to 5% return on investment. Even at book value the P/E would be well under 30. The point is the 1 Billion earnings (when?) is a premise for the high P/E ratio based on current earnings (note that with the recent dilutive mergers and increased share counts due to these and other option activities it is questionable whether they can significantly increase eps in the next few quarters). If you want to justify a high P/E ratio based on 2010 earnings then you better give a good argument for huge earnings in the years following that. Otherwise you are commiting an infinite regress type fallacy. The reason for this lies in the example of the bond company. Note that the further out you go the more uncertainty and risk there is ---new technology, global financial changes, wars, even solar flares (has some scientists worried), computer software bugs (or even the fear of them - Y2K)..... I am even ignoring these which should be reflected in the price. Appreciate your response, Joe
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