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Technology Stocks : EMC How high can it go? -- Ignore unavailable to you. Want to Upgrade?

To: Allegoria who wrote (11853)	1/13/2001 9:14:09 AM
From: Bill Fischofer	Read Replies (4) \| Respond to of 17183

Technology vs. Stock Price The problem with these arguments is that while they purport to be about technology it is clear that they are really about stock price. The case has been made here repeatedly that the storage market is not a zero-sum game and that there is ample room for EMC, NTAP, and many other companies to be successful in this market over the long term. The problem investors face today, however, is that the market is in a pronounced valuation correction. Quite simply, the market is not willing to pay as much for a dollar of future earnings power as it was a year ago, or even three months ago. This is why companies with great businesses have seen their stock price only pummelled while those with questionable businesses have seen theirs destroyed. While it is understandable that NTAP proponents would want to justify their investment the fact remains that NTAP still trades at more than twice the relative valuation of EMC. The question isn't whether NTAP is sufficiently "better" than EMC to justify such valuation. The real question investors across the board need to be asking themselves is whether any company is deserving of super-premium valuation in today's market climate. There was a time, not so long ago, that a PE of 40 for an established company was considered very rich. It is only in the past few years that valuation inflation in response to the rise of the Internet has changed that perception. If we are in the process of regressing to more historical valuation standards, then the best investors can hope for is a period of consolidation while underlying fundamentals catch up to price.