on overvaluation, analysts, etc: ive given it a lot of thought over the past months, and as much as i wish it were different, my take is: we are compressing the gaps between classes of stocks now evolving to embrace the net future, either as their core business, or as a new way to execute their current business, and it's a natural process, not manipulation. by compressing, i mean coming to terms with meaningful comparisons among players, and the T showing of the past week seems to help confirm that. AOL has been called the top blue-chip internet, and it is. more traditional blue-chips, such as T, IBM, etc. have, and will move up in stature and price as they are seen moving successfully into this next economy. what also must happen in this environment is a relative price consolidation. run-away valuations will not last forever on a wide scale. they will continue to exist for a good while, imo, but what we are seeing and reacting to is the beginning of this price consolidation. so, if T develops/buys significant content, gathers up 18m aol-type customers of their own, and has the network to make it perform, what should they be worth? should we apply the aol p/e, and multiply T's values by 7 or 8? if aol doesnt earn more than 1.00/yr over the next 5 years (due to buying into/developing a network, expansion costs etc.), should their price be maintained as the top dog? what we will see, i believe is a movement towards the middle. considering the markets reactions to "pure price", ie, not to absolute concerns over finely calculated p/e's, my guess is that T and others will gain on the upside, and AOL, YHOO, ATHM, etc will, and must, move down. the question is how far, how fast, for both sides. certainly, if the FCC were to disallow the MediaOne purchase, T will fall, and AOL will soar. and this happens not on value, but on relative comparison of positional threat to a market niche. AOL's niche is now threatened, to a degree, at minimum in terms of their margins, which will erode if they are made to pay dearly for the assumed need to provide broadband access on a wide scale. new "price magnets" are being established, and for better or worse, companies like AOL, AMZN, etc will begin to move more in relation to the emerging players in their field. anybody see BKS at 150? i dont....icons are great, and have their place, but change is afoot.
the real question here may be how this style of market has boosted the street's returns, and how willing are "they" to let that aspect go by driving prices down and minimizing volatility? i believe theyll keep it going as long as possible, but along the way, more consolidation must occur.
anyway, sorry for the rambling, and good luck to all. |
