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Rebuttal: DCF Analysis (1)

Rebuttal: DCF Analysis (1). Forecasting DCF is a nebulous practice at best DCF is dependent on human inputs for future growth estimates and discount rates DCF estimates are highly sensitive to small variations in these inputs

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Rebuttal: DCF Analysis (1)

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  1. Rebuttal: DCF Analysis (1) Forecasting DCF is a nebulous practice at best • DCF is dependent on human inputs for future growth estimates and discount rates • DCF estimates are highly sensitive to small variations in these inputs • Forecasting accurately in established industries is difficult enough, in fast moving, emergent industries it is next to impossible

  2. Rebuttal: DCF Analysis (2) DCF uses traditional earnings and revenue models. • We need more precise methodologies based on growth and profit potential, that take into account unique characteristics of the information economy.

  3. Rebuttal: Online Trading • Argument: • Online trading is responsible for the increases in Internet stocks. • Rebuttal: • All stocks are potentially subject to the “haphazardness” of online trading.

  4. Rebuttal: Internet Hype • Argument: • The Internet “craze” is responsible for the increases in Internet stocks • Rebuttal: • There are many more factors that influence the price of a stock than DCF is able to capture

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