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Technology Stocks : Amazon.com, Inc. (AMZN) -- Ignore unavailable to you. Want to Upgrade?

To: Victor Lazlo who wrote (36370)	1/24/1999 7:43:00 PM
From: Glenn D. Rudolph	Respond to of 164684

The Internet Capitalist SG Cowen Internet Research 6 think…that YHOO will outperform the market longer term. We may see some significant dips/corrections/declines in this stock sooner rather than later, a timing call we're just not smart enough to make with any precision. Is YHOO worth $75 billion, $100 billion? That depends on lots of factors that, for now, all seem to be pointed in the right direction and that the market is willing to discount. And because we can't come to some formal conclusion about YHOO's valuation, we have opted to stand pat on our rating and maintain our Strong Buy. Our philosophy toward rating systems in this space has less to do with trading calls and more to do with differentiating the wheat from the chaff. Yahoo! happens to be the best example of Internet wheat out there, all the more so since some of the veritable sea of chaff remains as highly valued (inexplicably) as this Internet Blue Chip. Our Valuation Thoughts Have Evolved… As we've watched the stock over the last few years, we've come to the forgone conclusion that conventional valuation measures fail to address the unique elements of these Internet businesses; scalability, operating leverage, and the dynamics of increasing returns. Yes, we've been both witness to and purveyors of some of the more creative valuation methodologies applied to Yahoo! over the last two years. Now that Yahoo! has reached their new target operating model, much of the Street is actively engaged in determining what those margins could be longer term, an entirely reasonable exercise in our view. Our bets in the Internet space over the last few years have tended to coalesce around those established leaders whose markets were big, whose management teams were aggressive and smart, and whose business model made the most sense. Just like AOL and Amazon, we think Yahoo! is one of those companies; if the market continues, as has been its wont, to pay up big for growth like this then YHOO is going to benefit, because it is certainly delivering growth. Of course, if the tide turns on growth, even wheat gets deflated. So What's The Strategy With The Stock?… If you've been smart enough to have owned Yahoo! for any reasonable amount of time as it has grown into a media behemoth over the last two years, you have been part of one of the single greatest market cap growth stories in the history of stocks. And you'd be right to think about protecting some of those well earned profits. Does it make sense to protect some of those gains by taking some YHOO off the table at these prices and in a market as skittish as this one? Probably, yes. We, too, are looking for that event or series of events that cause a correction in this sector, and though we have our eye on a few of them, and it looks like some semblance of deflation may be gripping this sector, nothing is definitive, which means that the reward in this space is a lot lower today than it was even 6 months ago and the risk a good deal higher. Longer term, we're still enormous bulls about the Internet sector and these companies' collective ability to change the face of the US economy, but we're sleeping a lot less these days than we'd like to be because the market seems to be discounting the 7th inning of this game when, in fact, we're still at one out in the 3rd. Trend Watch What's The, Whose The Target? On Thursday, after the market closed, XCIT released their 4 th quarter earnings. While we detail the key results of the quarter under Company Watch, there are a few underlying issues that struck us on both the earnings conference call and over the past week while we digested the Excite/@Home merger news.