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Technology Stocks : Trading TAVA -- Ignore unavailable to you. Want to Upgrade?

To: Jack Zahran who wrote (72)	2/20/1998 9:33:00 AM
From: Skeptic	Read Replies (1) \| Respond to of 655

Skeptic your basing your arguments around your false assumption that Y2K is hype. What? I've repeatedly said that Y2K is for real and very serious. What I am questioning is how much value it has for the companies involved in remediation. What no one seems to understand is that investors are willing to pay high multiples for earnings only on the assumption that current earnings will not only recur, but also grow continuously. Obviously, this is not the case for Y2K earnings. They are a one-time windfall and therefore don't deserve any multiple. Suppose Tava earns $2 per share from Y2K for the next 4 years. What is that worth? With a 20% discount rate, $5.18. And no one (save TM) expects them to earn anything close to $2 in either 1998 or 1999. Recognizing that Y2K earnings have only marginal value, investors in all of these companies then say that it can be used to leverage their base businesses, if they have one. No doubt, it will have some effect, but it can't significantly benefit all of them. There will be a handful of winners and many losers. If Y2K is as serious as I believe, it will have a major impact on the economy that will end the current run of investor euphoria. Average P/Es could easily return to the normal mid-teens range. That would be a 40% drop for the average stock! Who will want to own a speculative small stock in that environment?