纳斯达克的忧郁与线索——第二部分：纳斯达克100的预期分析

CREDIT SUISSE FIRST BOSTON CORPORATION

Americas

Michael J. Mauboussin 1 212 325 3108 [email protected]

Jay Freedman 1 312 750 1384 [email protected]

Christian Pitt 1 312 750 1385 [email protected]

Alexander Schay 1 212 325 4466 [email protected] Equity Research

U.S. Investment Strategy March 5, 2001

Nasdaq Blues and Clues—Part II

Expectations Analysis for the Nasdaq 100

• Since the end of November, earnings estimates (based on our internal estimates) for the Nasdaq 100 in 2001 have been trimmed an additional 6%, following a substantial 8% decline from March 2000 and November 2000.

• Expectations for future earnings growth rates have dropped to 16.1% currently, well below the 18.5% rate implied by the November composite and the over-21% rate in March 2000. This is by far the most important driver of value. We estimate that over 50% of the Nasdaq’s three- and 12-month decline stems from this moderation.

• We figure that the discount rate has increased about 25 basis points, to roughly 14.5%, since the end of November. Given the general concerns about the sector, it is no surprise that investors

require a higher return to participate in it.

Executive Summary

The Nasdaq’s 20%-plus tumble since the end of November and near 60% plunge over the past 12 months has left many investors wondering what happened and, more importantly, has sparked animated debates about the future. We believe our proprietary valuation work offers unique insight into current market expectations and the revisions in those expectations over the past three and 12 months. Further, our tools provide investors with the necessary calibration and sensitivity analysis to make forward-looking investment decisions.

• Value is driven by the future cash flows discounted to a present value at an appropriate discount rate. We can segregate cash flow forecasts into three pieces: a base level of earnings, future growth in earnings, and reinvestment needs. Given that the Nasdaq 100 is largely comprised of capital efficient, knowledge-based companies, capital efficiency plays a very limited role in the sharp revisions in expectations. However, base earnings, as well as anticipated earnings growth and discount rates, are all worthy of discussion.

Figure 1 Nasdaq 100 Nosebleed: Lower Estimates, Lower Growth Expectations, Higher Required Rate of Return CREDIT FIRST SUISSE BOSTON

March 31, 2000 November 30, 2000 ### March 2, 2001

Income Statement Data:

Fiscal Year (Income statement date): 2001 2001 2001 2001

EBITA- NASDAQProxy 137,764.3 114,743.1 #### 108,079.2

Business Model Value Creation:

EBITAgrowth rate: 21.1 18.5 16.1 Pretax ROIIC 150.0 150.0 ## 150.0 Note: Aftertax ROIIC 97.5 97.5 97.5 97.5

Discounting Mechanism( Investment Neighborhood):

Required Rate of Return (cost of capital): 12.66 14.25 14.50 Value horizon years (frombalance sheet date to CAP): 19.0 20.0 ### 20.0 C.A.P. (Duration of value creation): Dec-2019 Dec-2020 ### Dec-2020

Valuation:

Source: CSFB analysis.

Our analysis shows the following (see Figure 1):

• Since the end of November, analysts have cut 2001 earnings estimates (based on our internal estimates) about 6%. Earnings reductions account for less than 25% of the Nasdaq’s fall, by our calculation, over the past three and 12 months.

• Expectations for future earnings growth rates have dropped fairly precipitously. In March 2000, the expected growth rate stood at just over 21%, by November 2000, that number was about 18.5%. Over the past three months, the earnings growth rate has come down further, and is now about 16.1%. For the Nasdaq, earnings growth is, by far, the most important driver of value. We estimate that over 50% of the Nasdaq’s decline is the result of this reduction. Since most companies in the index are so-called New Economy companies, and hence capital efficient, they are extremely sensitive to growth.

• We figure that the discount rate is now roughly 14.5%, up from 14.25% in November and about 12.7% in March 2000. The higher rate of return reflects continued investor concern about the sector. This increase is the final 25% of the index’s drop.

Bulls and Bears Investors continue to passionately debate over whether or not the market’s correction is overdone. We believe that the expectations approach frames the discussion in a very useful way.

The bull case is that better economic growth and/or firmer IT spending fuels an increase in long-term earnings growth rate assumptions. Relatively modest increases in the expected growth for the Nasdaq 100 would lead to sharp appreciation.

The bear case notes that earnings estimates and growth rates remain too high, and may be subject to further, substantial, downward revision.

Sensitivity Analysis In order to quantify the impact of these varying views, we provide some sensitivity analysis:

• A future 10% change in aggregate composite earnings equals a change in the index of about 9%.

• A one percentage point (100 basis point) change in the expected growth rate equates to a delta in the index of about 10%.

• A 50 basis point change in the discount rate represents a shift in the index value of about 7%.

Figure 2 Sensitivity Analysis CREDIT FIRST SUISSE BOSTON Estimated Market Fit Sensitivity too Growth Rate

March 2, 2001 March 2, 2001 March 2, 2001 March 2, 2001 March 2, 2001

Income Statement Data:

Fiscal Year (Income statement date): 2001 2001 2001 2001 2001

EBITA - NASDAQ Proxy 108,079.2 108,079.2 108,079.2 108,079.2 108,079.2

Business Model Value Creation:

Discounting Mechanism ( Investment Neighborhood):

Required Rate of Return (cost of capital): 14.50 14.50 14.50 14.50 14.50 Value horizon years (from balance sheet date to CAP): 20.0 20.0 20.0 20.0 20.0 C.A.P. (Duration of value creation): Dec-2020 Dec-2020 Dec-2020 Dec-2020 Dec-2020

Valuation:

Source: CSFB analysis.

Some additional sensitivity analysis is shown in Figure 2. In times of turmoil, it is important to go back to basics. Our analysis provides a clear look at the market’s current expectations for the Nasdaq, and shows where the points of sensitivity lie.

While this is an aggregate view, it provides an important context for understanding past performance and anticipating the impact of future revisions in expectations.

N.B.CREDIT SUISSE FIRST BOSTON CORPORATION may have, within the last three years, served as a manager or co-manager of a public offering of securities for or makes a primary market in issues of any or all of the companies mentioned.

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