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

To: Reginald Middleton who wrote (8845)	7/2/1998 1:28:00 PM
From: johnd	Read Replies (1) \| Respond to of 74651

Reginald and Ibexx: Hot air is starting to come off. Measuring hot air: There is 30% to 40% excessive hot air in this balloon. During the last 12 months, MSFT has traded between 45 to 65 PE. MSFT nominally trades at around 50PE. I think 5 yr average is around 41. But recently, during the last 2 yrs, it has traded on the average at 50PE. Currently it has a trailing EPS of 1.68 that gives at 50 PE, 110 - 84 => about 26 points of hot air. Even if I take the 1.78 EPS expected for FY98, there is a 110-89 => 21 or about 20% hot air. Some people argue not to use PEs but no one on this thread has justified why MSFT will continue to trade at 65 PE for the next 5 yrs. The downside risk, or margin of error, is terrible at this level. Hold your breath. Keep your parachutes ready. johnd