Paul,
I am not saying that I would buy shares at the current price or recommend a buy to friends or family, just that I think for a long-term player that $46.00 is not an unattractive price. I told my father to try to pick up shares (again) in the low 30's when we were trading in the mid-30's. I am not sure if we will see the low 30's again. If we do, I would also be a buyer.
If you realize what Sam has said, the fact that SNDK is the only pureplay in digital cameras and a pretty damn good mp3 pureplay, you can image some "exuberant" investors inflating the stock price to triple digits.
If we earn $0.20 this quarter, or something close to that, the estimated earnings for 2000 will be well over $1.00 per share. (I dare say it may be quite a bit higher than that.) Thus, the forward PE is attractive right now at 40. The P-to-B ratio is partially explained by the intellectual properties, the outsourcing of manufacturing and a streamlined work force focused on R&D and some in-house production. Recall that SanDisk could enjoy significant increases in card sales without adding an additional person to the payroll.
By 2002 I don't believe that $1 billion dollars in sales with a 30% net profit margin is unrealistic, especially if the Lexar suit is concluded successfully and other intellectual properties are defended successfully. In fact, it may be a gross underestimate. For example, I recently read that sales of mp3 players are project to reach 32 million units by 2002. And this will represent only a single segment of SanDisk's target market.
Thus, if my mathematics are correct, $300 million in net revenues could yield earnings of $4.00 to $5.00 per diluted share in 2002.
I think we should reassess our thinking in 2 weeks after earnings are reported and Dr. Harari gives us some insight into the remainder of the year and beyond.
In the meantime, let's hope for a narrower trading range and a slow, steady march to the top! That is all a SNDK long can ask for.
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