Valuation of Internet and Technology Stocks (eBook)

Cover 1
Contents 6
Preface: The collapse of Internet and technology stocks 12
Chapter 1. The age of information and the democratization of data 14
Technological change and the stock market in history 15
The defining moment for the Internet: ‘The Protocol for Packet Network Intercommunication’ 17
The democratization of data 18
Chapter 2. The New Economy: where do Internet and technology stocks fit in? 20
The New Economy defined 20
The New Economy and technology stocks 27
Technological change and US economic statistics 30
Schumpeter: the pioneer of the analysis of technological change 32
Tofler’s ‘third wave’ 33
The macro-economic consequences of the Internet economy 35
Chapter 3. Technology and the Internet economy: what made it all happen? 37
What is the Internet? 37
What is the Internet economy? 38
What is the World Wide Web? 40
What is an Internet Stock? 43
Developments in information technology 44
Appendix 3.1 Technology milestones in the evolution of the Internet 49
Chapter 4. Valuation techniques for traditional common stocks 55
Present value analysis: capitalization of income method 56
Fundamental analysis for valuing stocks 72
Economic value added (EVA) 86
Chapter 5. Applying the Porter model to the valuation of Internet and technology stocks 88
Internal analysis: strategic factors within the company 89
External analysis: strategic factors for analysing the industry environment 90
The Porter model, the Internet and the Web 95
The Porter model revisited 96
Technology stocks and branding 99
Financial analysis in the valuation of companies 103
Chapter 6. Applying traditional valuation models to Internet and technology stocks: what are the problems? 108
Financial accounting and intangible assets 109
The role of intangible assets: if you cannot touch it what is it worth? 112
Methodology issues in technology stock valuations 115
Appendix 6.1 Key accounting issues in Internet and technology stock valuations 117
Chapter 7. Bubbleology, stock markets and the Internet and technology stock price collapse 121
The Internet and technology stock price collapse 121
Bubbles in stock markets 122
Bubble terminology 123
The role of expectations in analysing stock market bubbles 124
Bubbles and the efficient market hypothesis (EMH) 126
Rational bubbles 128
Some famous bubbles in history 129
Speculative bubbles theory 136
Was the Internet and technology stock price crash a predictable bubble? 139
Chapter 8. How should we value Internet and technology stocks? I: Key methodology 140
Key issues in valuation of technology stocks 140
Valuation methods for technology stocks 141
Web metrics 147
Chapter 9. How should we value Internet and technology stocks? II: Ad hoc techniques and DCF revisited 152
Harmon’s Internet toolbox 152
Angel’s net stock valuation calculator 155
Discounted cash flow fights back! 158
Conclusion 160
Chapter 10. Derivatives markets, real options and the valuation of Internet and technology stocks 161
What are derivatives? 161
What are options? 163
Who participates in the derivatives markets? 166
The role of the arbitrageur and the pricing of futures markets 168
How are options priced? 176
Real options and Internet and technology stock valuations 190
Chapter 11. What are the lessons for investors from the year 2000 technology stocks collapse? 200
The laws of economics have not been repealed 201
Recent mistakes must be avoided 203
Schumpeter and creative destruction 203
Bibliography 205
Websites 211
Index 214