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Technology Stocks : AUTOHOME, Inc -- Ignore unavailable to you. Want to Upgrade?

To: gpowell who wrote (22363)	5/18/2000 3:08:00 PM
From: j g cordes	Respond to of 29970

thanks gpowell..

To: gpowell who wrote (22363)	5/18/2000 3:13:00 PM
From: j g cordes	Read Replies (1) \| Respond to of 29970

Gp.. nice analysis.. posting here for comment: Message 9514618 "No, I wouldn't buy at its current price. Here is how I would set entry points on it. Take the expected annual trailing revenues two years from now and multiply that amount by 7 and again by 10. Assuming that ATHM doesn't take on any long-term debt in the next year and ignoring the acquisitions, the product of that calculation should give a reasonable range of its market capitalization two years from now. You then need to present value those amounts using a discount rate of say 20% for today's value. In yesterday's post, I assumed a 30% sequential quarterly sales growth. Generally, those who know technology stocks well say that “the law of big numbers” doesn't permit sustained revenue growth of that magnitude. The commonly held view is that a start up company with sequential quarterly growth of 30% in the first year will likely have 20% in the second and 10% in the third. However, acquisitions can punch sequential revenue growth way up. Looking at yesterday's post, I showed that compounding at 30%, ATHM would have trailing annual revenue of $576,549,000 in the quarter ended March 31, 2001. (I don't personally believe ATHM will continue to grow that fast but let's use it as an illustration). Multiplying that revenue by 7 and 10 gives us the following market capitalizations: Market capitalization at 7 times = $576,549,000 * 7= $4,035,843,000 Market capitalization at 10 times = $576,549,000 * 7= $5,765,490,000 Now, dividing those market capitalizations by ATHM's shares outstanding, gives us price per share sometime around 3/31/01 as follows: Future price/share @ 7 times = $4,035,843,000/120,483,000= $33.50/share Future price/share @ 10 times = $5,765,490,000/120,483,000= $47.85/share To get present values of those future share prices, multiply the per share prices by 0.69 which is the present value factor for two years at 20% These numbers suggest the stock today is worth at best $35. That said, we may be in a new era where these old approaches no longer apply. But if the old valuation metrics reassert themselves, ATHM is going to get quartered or more. Regards, " We're at 21 3/4 now, as some point the shares are bait