Valuation of Internet-Related Companies

Abstract

La versión española de este artículo se puede encontrar en: http://ssrn.com/abstract=934324.

This paper will analyze the evolution of a number of companies (Terra, Amazon, America Online, Microsoft, B2B companies, online brokers...), although our focus will be the valuation of Amazon. We compare Damodaran's valuation by cash flow discounting ($35/share), Copeland's valuation by scenarios and cash flow discounting ($66/share) and our valuation by simulation and cash flow discounting: $21/share.

It is very interesting to compare and try to differentiate what Internet may signify in the first years of the 21st century with the revolutionary effect on society that the railways, freeways, airlines, radio, television and the telephone had when they first appeared. We also urge the reader to analyze the history of companies such as Levitz, Home Shopping Network, MCI, LTCM and Boston Chicken.

A website is not necessarily a business. Selling below cost gets you lots of customers, but not much money.

Keywords: Internet, Valuation, Amazon, Microsoft

JEL Classification: G12, G31, M21