Question

1. What are the characteristics of Internet stocks that influence their valuation? Explain.

Answer 1

Internet stocks are new age stocks which are differently valued than other stocks which are present in the technology sector because these internet stocks are always having possibility of getting a higher market share and they have unlimited possibility of growth in the entire global market.

there are different characteristics of internet stocks that will influence their valuations-

A).capability of increasing their market share very quickly because they can be accessible to a large number of consumer all across the planet.

B)they do not have any physical presence so any risk associated with the physical interaction between various consumers and suppliers are completely eliminated.

C) Internet stocks are also commanding premium valuations because they will be having their unique competitiveness because they are always trying to diversify their business into new segments.

D)these internet stocks have a higher adaptability to changing economic scenario so this will be reflecting into their valuations.

E)these are basically service sector stocks and information technology stock so there would be a lower number of fixed assets available in their overall books and they will have a higher amount of tangible assets available in the books.

F) the valuation of these internet stocks are always complex in nature because they are not easily valued by analyst due to their books of accounts which is mostly exposed to intangible assets

G) they will be having lesser competitor in same segment because these internet companies are always diversified in nature and they are trying to gain a competitive advantage and a leadership in particular internet segment only.

so it can be overall summarised that these internet stocks are very complex in nature and valuation is not as easy as other sectoral stocks so they should be valued after adequate considerations

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