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Technology Stocks : How high will Microsoft fly? -- Ignore unavailable to you. Want to Upgrade?

To: werefrog who wrote (4504)	12/25/1997 6:44:00 PM
From: Doug Fowler	Respond to of 74651

Yes, Microsoft has had a few years of outstanding earnings, but by their own predictions, their growth will be MUCH lower next year. Earnings reported in April are expected to be only about ten percent higher than the year ago period. That seriously brings into question a stock with a P/E of about 40. Combine that with the very bad PR they are getting, and the uncertainty of how their hands will be tied over Windows 98, and you could see the P/E go much lower. Late 1998 and 1999 look like they will be outstanding times for Microsoft, so it will depend on how far out the market is willing to look right now.

To: werefrog who wrote (4504)	12/25/1997 7:29:00 PM
From: Bearded One	Read Replies (2) \| Respond to of 74651

Stocks are ultimately driven long term by earnings. Does not MSFT have record earnings Record for what? Exxon, IBM, and several other companies all have more earnings than Microsoft, both per-share and overall. If you want to look at future earnings, then paying $120 for Microsoft implies (under current economic conditions) that you estimate that long-term, Microsoft will be earning above $7.20 a share (compare to a 10 year bond which is paying 6%). At $150, the estimation was for $9.00 a share. Compare to current estimates of around $3.00 a share. When a fine stock like MSFT has short term bad news, is this not a good time to buy? It depends. A gunshot wound is short term bad news, but there may be long-term implications. I think that the DOJ deciding that Microsoft's internet strategies are anticompetitive is long-term bad news for the company. Plus, Microsoft has done enough damage to its public reputation in the last few weeks that it may take years to regain the public trust it has lost. Now where is going to get its new revenue? I'm glad that you were able to play trading ranges for a while. That doesn't mean that you won't get burned as investors get smarter. One day, everyone will stop buying the dips and trading ranges will be history. But until then, best of luck to you.