The following commentary comes from an independent investor or market observer as part of TheStreet's guest contributor program, which is separate from the company's news coverage. By David Sterman NEW YORK ( StreetAuthority) -- It appears as if we've finally shaken the ghost of the dot-com bubble. The Nasdaq has been moving up sharply during the past few years and now trades at levels seen back in 2000, and a few recent dot-com IPOs are now valued in the billions of dollars. Yet as I noted in this article, investors may be setting themselves up to repeat history, assigning market values to companies that still have a lot to prove. Simply put, any company that is worth $8 billion, $9 billion or even $10 billion needs to be treated as a hot young growth stock for years to come if investors are to see any further upside. That's why I reflexively gravitate to stocks that appear to embed a much lower level of expectation. I also like to see these stocks move out of favor, at least temporarily, when a real sense of value can emerge. That's why I recently put Zipcar ( ZIP) in my $100,000 Real-Money Portfolio. It's also why I tend to hold off pursuing a recent gainer like real estate data service firm Zillow.com ( Z). Zillow's shares have risen roughly 40% in the past three months, and I'd rather check it out on a pullback. Follow TheStreet on Twitter and become a fan on Facebook. But a pair of other dot-coms is squarely in the doghouse, and their current valuations seem to sharply discount potential strong growth to come.
Still, this busted IPO sells for less than half the peak levels it saw soon after its August 2011 IPO. From a recent $9.30, Merrill Lynch says shares should rebound to $16. This target equates to four times projected sales, which is still below the multiples seen by other cloud-based businesses such as Cornerstone OnDemand ( CSOD) and Concur ( CNQR). Risks to Consider: Though investors no longer hold these companies to exceedingly high expectations, they are still expected to grow at a good pace in coming years. Any signs that growth is stalling out should probably seen as a reason to sell the stock. Action to Take --> The market is full of new dot-com business models that carry high expectations. If you want to ride the dot-com wave, then focus on lesser-priced stocks like these two examples. David Sterman does not personally hold positions in any securities mentioned in this article. StreetAuthority LLC owns shares of ZIP in one or more if its "real money" portfolios. More from StreetAuthority
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