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Pastimes : The Naked Truth - Big Kahuna a Myth -- Ignore unavailable to you. Want to Upgrade?

To: IceShark who wrote (56919)	8/18/1999 8:31:00 AM
From: Lucretius	Read Replies (4) \| Respond to of 86076

if they and DELL selloff on this good news... things could get nasty

To: IceShark who wrote (56919)	8/18/1999 8:34:00 AM
From: MythMan	Read Replies (1) \| Respond to of 86076

>>Equally sanguine are the best-known Internet analysts. Henry Blodget, of Merrill Lynch, puts the recent decline down to the rise in interest rates last month. That, and the prospect of further rate increases to come, have spooked the entire stockmarket. He also concedes that there has been some disappointing news about Internet firms. Take Amazon, for instance: its revenue growth has slowed down, its revenue per customer has fallen, and its cost of acquiring new customers has risen. But he thinks the news will improve later this year, and share prices will rise again. Moreover, most institutional investors are “underweight” in the Internet sector, and many are ready to pile in once prices seem to have bottomed out. All of this may be enough to give another euphoric puff to Internet-share prices. But it does not make those prices any less irrational. It remains true that nobody has a clear idea of how to value Internet companies—and that most analysts rely on shamelessly optimistic scenarios. For example, Mr Blodget reckons Amazon, with its $15 billion-or-so market capitalisation, is cheap because one day it will have a 30% share of what will be a $230 billion-a-year online-retailing market. Assume a 5% profit margin and a ratio of share price to earnings of 40, and the firm should have a market cap of $150 billion, he says. Trouble is, it is just as plausible to assume a 10% share of a $150 billion market (or worse), and a p/e ratio of 15. That would imply a market cap of only $11 billion. Reality check: in the first quarter of this year, Amazon's actual revenues were $293m, and it made a $62m loss. << economist.com