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Technology Stocks : Altaba Inc. (formerly Yahoo) -- Ignore unavailable to you. Want to Upgrade?

To: playavermont who wrote (25548)	5/12/2000 5:49:00 PM
From: The Other Analyst	Respond to of 27307

Two problems with your 18.5 p/e on 2005 outlook. 1. the $4 billion number in your denominator is pretax, as I understand it. And I think $10 billion revenues is more than anyone is forecasting that I have seen. But let's just assume $10 billion for now. It is a great company. $4 billion times 0.65 to tax effect it is $2.6 billion. 2. To get a multiple, we need to grow the market cap too. Let me use 20% as their cost of equity capital, corresponding to beta of about 3.0. $75 market cap in 2000 grows to $187 billion in 2005. P/e in 2005 becomes 72x (not 18.5 x) Big difference. We need some more optimistic assumptions to justify current valuation. Like maybe $40 billion of revenues? That would get you to "fairly valued" If you wanted a 2005 scenario that would enable you to say buy, however, we need more than $40 billion in revenue in 2005.