Valuation methods of Internet stocks

Inhaltsangabe:Abstract:

The purpose of this thesis is to discuss some important reasons for the recent boom of Internet stocks, and to show and assess different methods to evaluate them.

The Internet is a medium which is yet in the early days of its development and which will revolutionize communication habits, trade and leisure time behavior in an unseen manner. I will show this in the chapters 2 and 3 with psychological reasons for the recent boom.

After that I present 3 typical Internet companies (Yahoo!, eBay, and Amazon.com) with their business content, financial data, and future outlook.

Afterwards, the analyzing part of this thesis starts, and I demonstrate which figures an investor should look at in order to have a broad overview about the investment.

In chapter 5 I present some financial figures from both the income statement as well as the balance sheet, in chapter 6 I give a survey of ratios which are used from analysts and make some comments about how practical they are.

Subsequently, chapter 7 deals with more traditional valuation methods, used by institutions like the Federal Bank of America. These are general methods in order to show whether markets are over-/ undervalued or not.

After that, I present the valuation models used by investment banks: Economic Value Added (EVA, chapter 9), Discounted Cash Flow (DCF, chapter 10), Real options theory (chapter 11), and multiples (chapter 12).

In the last part I summarize the outcome and give an outlook how Stock orders are based on expectations only.

Inhaltsverzeichnis:Table of contents:

1.Introduction1

2.Day traders6

3.Principle of floating12

4.Presentation of 3 typical Internet companies: Yahoo!, eBay, and Amazon.com15

4.1Yahoo!16

4.1.1Business description16

4.1.2Financial data20

4.1.3The outlook24

4.2eBay26

4.2.1Business description26

4.2.2Financial data27

4.2.3The outlook29

4.3Amazon.com31

4.3.1Business description31

4.3.2Financial data34

4.3.3The outlook36

4.4Comparison eBay versus Amazon.com41

5.Financial figures to look at

5.1Income statement analysis45

5.1.1Sales45

5.1.2Gross margin46

5.1.3Operating expenses46

5.2Balance sheet analysis47

5.2.1Inventories47

5.2.2Cash position47

5.2.3Quality of the management48

5.2.4The competitive landscape50

5.2.5Market position50

6.Ratios51

6.1Return an marketing52

6.2Price earnings to growth52

6.3Price/earnings (P/E) ratios as a traditional method56

6.4Price/sales ratio57

6.5Debt/capital [¿]