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Technology Stocks : VALENCE TECHNOLOGY (VLNC) -- Ignore unavailable to you. Want to Upgrade?

To: LiPolymer who wrote (19646)	5/11/2000 10:10:00 AM
From: Larry Brubaker	Read Replies (1) \| Respond to of 27311

<<But certainly if one merely waits to see break even, much less positive earnings, in the financials, it will be too late.>> Too late for what? If you've read either of Peter Lynch's books, you'd see that he counsels against investing in story stocks until they have demonstrated positive earnings. He cites numerous examples of story stocks that delivered 10+ baggers to investors long after they became profitable. MSFT probably has increased at least 1000X since it became profitable, for example. He also believes that the story does not pan out for 9 out of 10 story stocks. To suggest that one is "too late" if one waits to invest until the company has reached break even or profitability would say to me there isn't all that much potential in the first place.

To: LiPolymer who wrote (19646)	5/11/2000 10:51:00 AM
From: MGV	Respond to of 27311

You wrote alot and said little lie po. What you did say was mightily flawed. First, "So if the company continues to deliver on its promises since turning the corner on commercial production and can lock onto the projected growth curve, higher multiples are justifiable and will be afforded." The problem you have in justifying valuation is that VLNC at $15 already has to account for a very high multiple. I don't think you have any idea how high a P/S of 20 times forward is. There were very few companies selling at 20 times revenues 2 months ago. There are significantly less today. To boot, the 20 times is based on a forecast by the sole investment banker who has provided any coverage. In addition, VLNC has little visibility to offer today on how likely 24.7 million really is over the 12 months beginning 4/1/2000. It is built on a forecast from a standing start. They just reported a little over 400 *thousand. The forecast is for roughly 15 times that (ie 6 million) per quarter. No, the multiple that you are paying for VLNC today is very expensive and discounts much more than 2001 revenues if it is merely to hold here, let alone go higher. The Toshiba reference by Cohen is very instructive. The key to success in the advanced rechargeable battery market will be OEM relationships. In cell phones, the blue chips are NOK, ERICY, and MOT. In laptops, it is DELL, GTW, and CPQ. Anyone who follows this industry knows that there are long design lead times. Given Toshiba's relationships (ie. credibility) with top tier OEMS, in the absence of any other information, the likely choice for top tier OEM wins are the companies with pre-existing relationships. VLNC has no relationship with any of the top tiers with one exception: MOT. They have a history with MOT that does not provide confidence to any of the top tier OEMS. Don't believe for a second that that history has not and does not hurt VLNC in competition. Don't believe for a second that even if VLNC has a competitive product with reasonable manufacturing efficiency rates, the Toshibas of the world do not use the VLNC history as a persuasive selling point. The bulls on this thread point to Globalstar as an OEM win for VLNC. The best that could be said is that it is something. You cannot say that it is a blue chip highly sought OEM relationship. Neither is QCOM. QCOM is a great company. But it is not a great OEM manufacturer. It sold off its handset business. Second, "But certainly if one merely waits to see break even, much less positive earnings, in the financials, it will be too late."* This statement is ludicrous but not surprising. It belies the low level of confidence in VLNC's long term prospects. Admittedly, you cannot be faulted for that. It explains the defensiveness. Nevertheless, observe the internal inconsistency in your statement. On the one hand, you profess to invest in VLNC because you think it has high potential growth prospects. On the other, you believe that waiting until it is breakeven will be too late (to benefit from the potential growth). Finally, " .... There are a wide universe of equities in growth markets that one could make the same arguments for on valuation ..." There are few, if any, that are as stretched on valuation as this one is. A wide universe? Start naming them. You named none. Today, so far, technology is rallying but VLNC is down again. I think valuation has much to do with it.