OK, so your point is that the internet companies are implicitly projected to grow to a size unimaginable from their current small bases. As they used to say "trees do not grow to the sky." I will concede that point.
I was pointing out, indirectly, what I considered the flaw in your analysis, which is that the same analysis shows that "regular" companies are grossly overvalued too (or at least Coke). If your argument is that the internet companies are uniquely overvalued, not just part of a generally overvalued stock market, then you should be able to apply your valuation methodology to a "regular" company and come up with a price roughly in line with the current market price. If your argument is that the whole stock market is overvalued, then say so.
So, you are not all that familiar with Coke. Perhaps there exists a large, non-internet firm that you are more familiar with. Perhaps one of the general retailers you mentioned: WalMart, Costco, Home Depot, Borders, Safeway? Heck, just pick a company whose long-term survival is not in serious doubt, and show how the exact same analysis gives a reasonable price and does not assume unreasonable growth.
I'm saying that any company that has a reasonably high P/E (as compared to others in this market) will have a heck of a time surviving your assumption of a decline to a P/E of ten within a reasonable amount of time and still justify its current price. I do own a couple of stocks that could survive this analysis, I think, but very few will. |
