How high will Microsoft fly? Message Board

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Technology Stocks : How high will Microsoft fly?

MSFT 490.83

-0.1%

2:25 PM EST

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To: ed who wrote (23246)	5/26/1999 12:48:00 PM
From: johnd	Read Replies (2) of 74651

Ed, For the record, I also remember how confident you were about hitting 200 or 100 after split by Februrary 1999. So let us stop measuring us on how well we did on short term predictions. I am a believer in fundamentals for long term share performance. Take last three years and take any measure: Book value, cash per share, cash flow per share, eps growth, revenue growth (with or without unearned revenues). MSFT has a grwoth rate in the range of 25% to 70% for the various fundamental metrics I mentioned. In Jan 97, MSFT was at 90 and since then it split twice. So at current levels it is being at 310 or 3.5 times the valuation it was in Jan 97. Giving it the best of the growth factors of 70x per year, it should be about where it is now ~80. Continuing on, it should be around 123 by Jan 2000. But I believe people are used to this declining interest rate environment where stocks kept getting richer and richer multiples. That could change, and the recent fed signal could be first. Besides we are getting to the end of presidential term. Policy makers change and that causes market disruptions. I expect a severe correction in the stock markets before the end of the year. Very likely taking the dow to 7500 level and NASDAQ to 1500 level. Along with that will come a decline on all blue chips. I am sympathatic to DELL and ORCL owners who thought what they had was golden goose. Fortunately I don't see that kind of danger with MSFT (i.e.30%- 40% correction danger). But expecting 100%+ year over year gain in MSFT stock price while the company fundamentals are growing only at 30% - 70% range could lead to false expectations.

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