<<FOr a very technical analysis of why PE's shouldn't matter, please visit the new AOL thread>>
When the inevitable bubble burst, because bubbles always do...the question that will be asked, will be " what were these people thinking?". It's interesting, that these stock boards exist, because I think they will go back to them looking for clues to explain investor sentiment. On the one hand, PE's don't matter, but in the next breath they argue how Yahoo might possibly generate large revenues and earnings.
What becomes apparent to me, is that the Yahoo long isn't buying a piece of the company, they are buying a stock. This stock goes up and never goes down. This stock will make them rich. If Yahoo was a $10 dollar stock, and hadn't budged this year, would they be saying the same things about the company. Would they look at the Yahoo site, and say "what potential, I think I will buy the stock?"
I don't think so. They aren't looking at Yahoo at all, they are looking at the stock price.
<< a) YHOO is one of the first portals to offer international coverage. Even if we discount product expansion and consider only ad revenue, that should monopolise eyeball traffic. I had discussed India, Japan, China with MadDog in one of the posts. Do the combined and exploding populations and emerging economies of India and China count for something ? Does the lack of infrastructure create opportunities for YHOO ? You bet it does. Multinationals are falling over themselves to take a piece of the cake. Do you think it will be any less for internet ?>>
Are you aware that most of the worlds population has never used a telephone?
Yahoo in the third world? That's what you are counting on? The average annual income for a person in India is not even enough to buy a PC.
As for countries like Japan, Yahoo only has a minority interest in their foreign operations, according to their 10Q, BTW. I am aware that there will be some level of usage of the internet in all countries. I have taken that into consideration. Many U.S. businesses do business overseas. This is not unique.
<<b) YHOO is constantly evolving - introducing innovative products and services. Purely from ad revenue point of view, doesn't that translate into more space and $$$ ? Number of services multiplied by n times international coverage.>>
They are introducing new products? Well, I suppose they have new content at their sites, just like a magazine publishes new stories each month. Just like a magazine they will have too come up with new material on an ongoing basis to keep people coming back. It doesn't translate into a percentage increase in revenue. There is also some disagreement about the number of Yahoo users. According to Media Metrix (which is considered to be the Nielsens of the internet) Yahoo, has been losing users this year, not gaining. Yahoo reports the number of people that have signed up as registered users, but this number is deceiving, since there is no way to delete a Yahoo account.
<<c) Thru business alliances, YHOO is promoted in schools. Catch them young. Do you think that counts for brand recognition...? How much is that worth in terms of future potential ?>>
Brand recognition is worth whatever it takes in dollars to create that brand awareness. If I make a product and spend 500 million in advertising, I could get a more recognizable name than Yahoo in 6 months. ( actually I think I could spend under 50 million, but I am being generous) If you look at the products right now that are in your house, most of them have recognizable brand names.
Everyone has heard of Maytag, Kool-Aid, Folgers Coffee, Clorox Bleach, Rice Krispies, Doritos, etc. That is because they advertise. TV advertising is very effective.
<<d) While AOL/AMZN and the rest innovate and find other sources of revenue - you expect YHOO to remain static ? I believe someone mentioned commission on air tickets etc ? Right now this revenue is small because it is not incorporated into the business model. Should YHOO choose to flex its muscle, this can become significant portion of its revenue. The choice alone makes the business model very promising and flexible. YHOO is currently building its customer base....its wooing customers by providing free services. Once customers are hooked, and if there is a revenue shortfall, there can be ways of generating revenues from that base. Building the base is much more difficult.>>
I just don't understand why someone would hand out an Academy Award before the script is even written. Yahoo has a market cap in excess of most of the companies (that are proven and established) in the S & P 500.
This has never happened before. This is totally unprecedented, where a company has a market cap so out of whack with its current revenues. And the answer to that, is " they will think of new ways to generate revenue".
Your argument could be applied to any company in existence.
Are you really looking at the company? Or are you looking at the stock?
I think your blinded by the stocks performance. It's great that people made money of this stock, but it was based on a combination of some unusual phenomena's that are not likely to be continued forever.
On the other hand I saw a Yahoo long say this on another stock board.
"If Yahoo doesn't have enough revenue to justify its price now, what makes you think they will need it in the future? ".
<<e) Somewhere down the line if all else fails, if YHOO is not able to make it alone, I'd think it would be acquired. That being so, how can our investments be jeopardised ? >>
At today's market cap, Yahoo is in no danger of being acquired. If someone can duplicate Yahoo for less than a billion dollars (and it wouldn't even take that much, but for the sake of this argument, I will be generous and use that) Why do you think they would pay 30 billion for it?
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