With equities at all time highs, how do you stay BUY rated on stocks?
Say you cover Microsoft and your fundamental analysis gives a TP of $XX. But with general capital rotation into equities you are now within a few % of that TP, without any material change or catalyst to MSFT itself to justify the stock price appreciation. How do you address this? Go neutral? Find a way to up the TP?
Curious as well.
Outperformance is relative.
Some might cite an improvement in spending environment and bump out-year EPS.
Others might expand the multiple given the expansion of peer group multiple.
Reduce your wacc and your TP will shoot up.
Microsoft issued its 30 year bond at 3.5% last year.
What should their wacc really be if you calculate it a priori now versus 2007?
Discuss.
Have you seen a sell side report before? I can probably count the number of times that I've seen the letter combination WACC on one hand.
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