Re: Morningstar. Hey jbe, sorry dude, for the belated response. I'm on a hopeless endeavour to try catchin' up on stuff.
Yes, the proprietary alogrithm that Morningstar uses to provide an intrinsic value for these companies is, as you say, "conservative". After all, it even takes into account such factors as book value.
One would think that in a rational and efficient market that all stocks would reflect the consensus estimates for the present dollar value of all future cash flows discounted back to today.
But companies like webhosters and ASPs (and just dotcoms in general) are being valued on more speculative measures. Even after enjoying a low interest rate environment, these companies are being priced with expectations so many years into the future, despite the rapid pace of product obsolescene and changes in the competitive landscape inherent in technology (and warren buffett points out). Of all the ASP stocks I'm about to cover, only 1 (BWAY, because only 15% of its sales comes from ASP) is expected to turn a profit by the end of next year. In the meantime, webhosters and ASPs are spending a ton of capital expenditures while dotcoms continue to spend profligately on marketing. However, it's not a hopeless endeavour to try to differentiate the relative quality of names within the sector, or at least help investors better understand what they are buying, even if the entire sector itself looks disassociated from reasonable valuation metrics even after this recent blowup. But enough about that...
As for your question on my contention that SI is a dying community. There are exceptions. For example, I find the SI CTXS and SFTBF boards (disclaimer: I own both stocks) to be of amazingly good quality. I just feel that SI has done a poor job of deploying all the subscriber fees to build out the tools for making this a better site. I email them anytime I experience a technical problem. In one case, they sent me an email reply around 90 days after I emailed them. 90 days, amazing.
They haven't been nearly aggressive as The Motely Fool in enabling in preserving information and data mining. TMF tabulates social capital, allowing users to rate each other and various posts. And it archives all posts which are open to its search engine, whereas SI is technically unable to archive or search beyond the most recent 5% of my posts, much to my chagrin. One would think that SI would either have the best message board tools (which TMF does) or at least the most traffic (YHOO, Raging Bull does because SI is the only major pay posting site) but it is a second-tier player on both accounts.
Sometimes I feel they are just squeezing cash out of us longtime members as a cash cow on a legacy product. I don't have the exact link but Beth Kwon of TheStreet.com wrote a great article a couple months ago comparing all the boards and essentially had the same negative things to say about SI (compared to competitors) as I did.
Please forgive any incoherency or misspellings in this post, I must be typin' a gazillion words a minute. too much coffee for me today. gotta run...
cheers, - george/netconductor
>>jbe wrote:
Thanks for dropping by, Netconductor, and sorry to hear you are dropping out (of Symantec).
Yet must confess that I am shocked -- shocked! -- to learn that you would abandon a virtuous company like Symantec for profligate, no-earnings, cash-burning and altogether wicked ASP's and web-hosters!
Speaking seriously, just how do you, as a Morningstar analyst, justify the evaluation of such companies? This Rekenthaler Report is typical of the basic Morningstar approach:
news.morningstar.com
How do you evaluate them, period? Morningstar, after all, uses very traditional, very conservative, measures to determine the "fair price" of a company (in its "Business Appraisal"). By those measures, it considers even Symantec overvalued, appraising it at about $30, half of what it is selling for at this very moment ($61). It doesn't even provide a business appraisal for the companies you now are covering, on the grounds, I suppose, that until you have some earnings you have nothing to appraise.
The problem, as I see it, with using measures like price/sales, price/subscribers, price/webpage hits, etc., is that all too often companies with this kind of profile lose money on every sale/every new subscriber/every hit. So the more sales/subscribers/hits they have, the more money they lose! (The Amazon model.)
But I am not asking rhetorical questions here. Skeptical, yes, but willing to learn, even to change my mind, also yes.
Another OT question. I see you have only been an SI member for little over a year. What leads you to believe that SI is a "dying community"? True, members focus on a fairly narrow range of stocks, but I have found many threads useful and informative. What similar community, in your opinion, is alive?
Best,
jbe |
