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Technology Stocks : Vitesse Semiconductor

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To: V Lakshman who wrote (204)	9/19/1996 4:56:00 PM
From: SI-Shark	of 4710

V.Lakshman, VTSS is currently at about 25% E/S. Earnings have an upper limit of 20% to 30% assuming competition. So all future earnings need to come from Sales Increases. Sales are increasing by about 10% per quarter. So future Income growth will be more like 30% - 40% per year. Opening a new fab is good news long term but will mean the GPM will decrease short term due to capacity under utilization. Anyway, assuming a maximum of 40P/E trailing I would estimate that VTSS max price one year from today will be $40 (assuming no additional dilution). Maybe it will stay flat for about a year but I'm betting that all the momentum money that is invested here will leave once things level off. From there the only way is down. For VTSS the big problem will be finding long term capital interested in buying in when the momentum guys find another hot stock to chase. I see long term capital available at about $20 per share. Thats why I expect the price to fall to about this level. At above $20 there are simply to many undervalued semi companies with equal growth rates selling for P/E of under 20. regards Si-shark

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