Robert O,
I don't think layoff story was widely known, in fact the reverse.
I seem to remember that Morgan said recently that aside from the scheduled shut down just completed, they were not going to have anymore shut down or layoffs for the rest of the year. Would any AMAT historian please verify?
This thread and most analysts opinions have strayed away from valuation of AMAT for some time. I think regardless of whether you are a bull or bear, it is important to refocus on the current price and see if it reflects the proper risk and reward for this company.
FY ending Oct 99 per Zacks, earnings is estimated $.91 at this time. Based on today's announcement, this is most unlikely. The question now is when the market comes back, what are they going to be earning? It is now proven that this sector is not growth but cyclical. How much PE does a cyclical stock justify? If a ton of fabs get built in, say, the years 2001 and 2002, then we will be looking at over capacity again for 2003 and on.
So, is a 20 PE reasonable for this cyclical? At current price of around $30 and around $1 earnings, we are already at 30 PE. The banner year for AMAT was FY96 with E of $1.63, or a PE of 18.4 at current price of $30ish.
What does AMAT's earnings need to be to justify a price of $50, $80 or $100?
In summary, I think if one is to buy AMAT, it is of utmost importance to buy as low as possible and be on the look out for the peak of the next cycle. This sector is looking more and more like the auto industry now.
Ramsey |
