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Technology Stocks : How high will Microsoft fly? -- Ignore unavailable to you. Want to Upgrade?

To: ed who wrote (35914)	1/2/2000 10:20:00 AM
From: PMS Witch	Respond to of 74651

... The traditional thinking said the PE should be equal to the growth rate... When this thinking became traditional, interest rates were consistently above today's levels. When one buys a share, or the whole company for that matter, what they are really buying is the future income stream. High growth increases the value of that future income stream. High interest rates reduces this value. With today's lower interest rate environment, a fair PE would be higher than previous times. Couple this with high growth and today's PEs for companies such as Microsoft would seem insane by yesterday's standards applied to yesterday's companies. The big question is "Is Microsoft's share price too high?", and the answer to this question, which depends on both the company and the economy, which nobody really has, will determine tomorrow's share price. Cheers, PW.