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Technology Stocks : Altaba Inc. (formerly Yahoo) -- Ignore unavailable to you. Want to Upgrade?

To: Bill Harmond who wrote (12893)	7/20/1998 12:31:00 AM
From: Stanisav Richter	Read Replies (1) \| Respond to of 27307

W. Harmond cited AOL's chart and it is a valid bullish signal. However, that sort of admits that we are talking about a psychological game right now. AOL could very well drag YHOO up with it as AOL hits a new psych limit. The shorts could be in trouble until AOL gets to 150, maybe. Still, we are not talking about buy and hold valuation even on AOL (with its paltry multiple of what? 340?). Let's get to some common ground. YHOO's numbers are such that at 50% earnings growth it's current stock price represents a P/E of 20 some time in 2005, based on a bullish estimate for '98 of $.61 a share. At 75% earnings growth you're waiting until 2003 for a 20 multiple. That's with no price movement whatsoever, so you're losing interest earnable on that money. Now you can say that we should be using a sort of "enterprise valuation" like you do with biotech drug stocks. In that way you simply create a business model and get a value for it, then price that model and roll the dice. Okay, but you've got to get a "when" and some "what if" priced in. You never want to buy a business model that won't develop until year X at full price right now. There has to be some uncertainty and some interest cost priced in. I don't think it's reasonable to say that is priced in to YHOO right now. Again, I love the company. I use it all the time. However, prudence, if not simply common sense, suggests that there has to be some risk involved between here and the promised land. People get hung up on what is "true" and "false" but what we are talking about is probability. When YHOO went through 100 with a bullet, I knew that I had missed YHOO long for the year. It does not bother me in the least that YHOO went through 150 and continued to 200. I couldn't bet on YHOO long over 100 because the probabilities of a precipitous fall were too great for me to risk as a short-term player. Once 200 held, I felt that the probabilities of a precipitous fall were too great to ignore as a short term player. I'm not making a case against YHOO the company. I'm simply saying that these valuations represent much more downside risk that upside risk. If I'm wrong, the longs get a tip of my hat and the people who wrote the options I own keep their money and their shares. If I'm right, it doesn't mean that longs were wrong about the company, only about the risk.