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To: Danny who wrote (23013)	7/15/1999 6:56:00 PM
From: Jeff Dryer	Read Replies (1) \| Respond to of 27307

>Jeff, every word you said regarding valuation is absolutely correct >based on the traditional valuation model. But that is not how >WS behaves right now. Internet revolution is changing everything. Can you help me understand what you mean when you say the "Internet revolution is changing everything." Changes what? and why? >All I am saying is that before we see a clear sign that internet >growth is slowing down and people are getting out of the sector, >just ride out the volatility and look into the future. When you refer to "growth" do you mean growth in Internet traffic or growth in Internet stock prices or both?

To: Danny who wrote (23013)	7/15/1999 7:15:00 PM
From: Jeff Dryer	Read Replies (1) \| Respond to of 27307

>AOL is just as overvalued as it was last July. People who sold AOL >before the Oct correction may have had a brife 2-3 months congrat to >themselves, but are most likely regret that decision today after >watching AOL going up another 200%. Last July, AOL was selling for about $30/share. Based on today's shares outstanding of 1.28 billion shares, AOL's market cap was $40 billion in July 1998. In the Sept. '98, Dec. '98, Mar. '99 and June '99 quarters, AOL will generate about $400 million in Net Income for the year. Therefore, back in July 1998, AOL's forward P/E on the next 4 quarters earnings was about 100. Now, I estimate AOL's forward P/E is about 350 and revenue and earnings growth will likely be slowing to the 50% level from 100% plus. My conclusion is that AOL is about 3.5 times overvalued compared to one year ago. I will need to double check all these numbers but I am pretty certain the numbers I'm using here are accurate.