Over-valued internet company shares
Unrealistic expectations of internet profits
Internet-based companies are now the darlings of stock markets with, in many cases, enormous valuation but little or no profits. Quasi-economic arguments are used to justify hyperbolic stock prices of these firms. Although there is little serious financial justification, analysts point to concepts such as price-to-eyeball ratios to remain optimistic about their future profitability. Market analysts and investors consider conventional measures of valuation such as P/E ratio and growth rates as irrelevant.
At well over $100 a share, Yahoo!, the Internet's most popular directory service, is worth more than $6 billion in market capitalization with revenues of less than a few hundred million dollars. Other Internet companies such as Amazon.com, Excite and Lycos have equally extraordinary valuations.