Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Non-Tech : The Critical Investing Workshop -- Ignore unavailable to you. Want to Upgrade?

To: Dr. David Gleitman who wrote (2926)	2/7/2000 11:50:00 AM
From: Voltaire	Read Replies (1) \| Respond to of 35685

by: biggodzilla_2000 2/7/00 9:51 am Msg: 126976 of 127074 People, as hard as this may be to swallow the market still may have Q undervalued by 40% to 88% The market is forward looking, but it does not appear to have taken into account the drastic change in Q's business model. Q's margins should grow by 450% this year and some more next year and the year after. There a series of posts recently about Price to Sales ratio of Gorilla stocks. That generally the top Gorillas trade around 20 x revenues and that right now Q is selling at 27 x revenues along with Cisco and Siebel and they all seem to be fully valued now based on the price to revenues figure. At least that is what the Gorilla manual prescribes. I think however that a 27 p/s ratio for Q is low and here is why: (1) Cisco is trading at a 27 p/s. Cisco's net margins are about 15%. (2) Q is trading at a 27 p/s ratio - Q's net margins are about 6%. Argument (1) the market values Q's margins more than it does Ciscos. (3) Q's operating margins are predicted to hit 30%+ this year, 40%+ next year, and maybe 50%+ in coming years do to the change in its business model. I did a calculation on Q's future P/S if its P/E remains where it is at now. In 2001 if Q's revenues increase 50% in 2000 and then 50% in 2001 (who can say but reasonable and conservative in this tornado environment) Q will have revenues of $8.86 billion dollars. At a 40% operating margin that gives Q $3.54 bil in operating profits and at a 35% tax rate Q will pocket $2.3 billion in after tax profits. At a 150 P/E (about what Q and Cisco are at now) Q will have a market cap of $345 billion or just about Cisco's market cap today - but Cisco has over $12.1 billion in sales to support that market cap, Q will only have $8.86 billion. Thus because of the extraordinary margins Q will be able to earn from its new business model the market will either a) be forced to give Q a lower P/E to keep its P/S within the suggested range or (b) Q will deserve a p/s ratio of 38.9 to 51.9 x sales. Okay, okay, what I'm trying to say here then, is that Q is undervalued at 27 x sales - at least if Cisco is a model. Q earns more money and receives more cash flow from its sales than does Cisco, Q deserves a premium in P/S to Cisco to reflect the relative value of revenue to each company. As I said, the market is forward looking, but it does not appear to have taken into account the drastic change in Q's business model. Q's margins should grow by 450% this year and some more next year and the year after. Thus people, as hard as this may be to swallow the market still may have Q undervalued by 40% to 88%. Anyone still want to know if Q is a Buy?

To: Dr. David Gleitman who wrote (2926)	2/7/2000 11:55:00 AM
From: Lynn	Read Replies (1) \| Respond to of 35685

Good morning, David. >Do we need some CPR for qcom this morning? Yes, indeed. Would you care to do it or should I? To avoid having to get my next delivery of oil for a while [I have 7/8 of a tank, having filled two weeks ago at $1.099], I am burning the fast growing poplars I had cut down three years ago. Since this is trash wood, I just kept the lengths stacked and covered, not exactly inspired to split and burn it. Well, after my last oil delivery I dug out the wedges and sledge hammer and started splitting that useless wood. Someone on another thread deals with a company in PA that plays oil futures. By paying ahead, he was able to lock in a price of $.80 for oil this winter. Too bad that company does not accept customers in New England! Regards, Paula Bunyon, previously know as Lynn