To: gambler who wrote (3595 ) 8/13/1998 3:37:00 PM From: AJ Berger Read Replies (2) | Respond to of 44908
TSIG could have a $5 stock price next year?! Steve Harmon, Senior Investment Analyst at Internet.com uses a simple equation he mutated and stole from a cableTV industry analyst to try to justify the high valuations of Internet related stocks. He simply takes the current Market Cap divided by the number of members, and gets a dollar portion of that cap that each member represents. The current average being $131 which is arrived at by adding the market cap off all stocks in the ISDEX, and dividing it by the total number of unique members per service. Then you can also allow for the minimum 15% annual growth of the Internet itself, you can come up the the following number that I've mildly rounded: 40 mil shares at .40 a share = 16,000,000 market cap now divided that by 1.5mil "members" we are suppose to have access to this year, and you get $10.67 per person. Now, that amount fits into $131 about 12.28 times so, if the .40 cent stock appreciated 1228% by next year in order to fit into this model, we'd have a $4.91 stock. Now add that 15% overall Internet growth, & we're over $5! Of course, Mr. Harmons adaptation of this formula is just a stupid way that Wall Street tries to make sense out of Internet Stocks ridiculous valuations, and helps him justify how GeoCities can become a $90 stock, but since this seems to be the way these overpaid analysts are justifying their existances these days, let's just humor them by adapting their formula here. I've read other's on this thread fantasising about much higher stock prices by equating TSIG with the appreciation of Amazon, or CDnow, or even Ktel, but the Street will be using this method of evaluating TSIG's potential using Mr. Harmons method then any other, for now... P.S. if any of you actually care how CableTV valuation formula's work, I'll be glad to explain it, and you'll see how ridiculous Harmons idea is; no matter how neatly it may fit the current Internet Sector.