Tito and all:
I take the view that investing is part science,and part human psychology. Combining these two to make a prediction as to the price movement of a stock, is indeed an art.
With regards rational valuation, averaging the p/e ratios of amat for the last six years using and the numbers from wsrn.com,gives an average p/e of 19.33. The range is 8.1 - 26.4.
From a purely analytical perspective, multiplying out a p/e of 19.33 by 1998 estimates (Robertson Stephens & Co 1998-$3.87), gives a fair and "rational" price of 74.81.
Now adding the human psychology into the equation, some of the factors are:
Amat is becoming percieved as a nifty fifty type stock, and is being thusly rewarded with a rich p/e. This is a fundamental paradigm shift for amat that should sustain it's high valuation in both p/e and psr for some time to come.
In the conference call, management displayed an inspiring level of confidance, capability,and chutzpa. Wall st loves this no excuses talk (when there are previous positive earnings surprises to back it up), and about half of the analysts preceeded their questions with congradulatory comments on a nice quarter.
The industry is highly cyclical, and the public is percieving that we are only now ramping up off the bottom. This should be a plus.
65 dollar stocks like to become 100 dollar stocks (please credit this thought to the appropriate threader )or they get beaten down to the 30's (now which is more likely for amat?).
The 64 dollar question now becomes, what dollar value does one give to the subjective perception of amat's future? Quite high for the next while imho.
If one factors in the current psychological perception of amat, and reward it with a p/e on the high end of its historical average, along with a reasonable 1998 high end estimate of 4.00, the following unfolds: p/e 25-30 * eps 4.00 = p 100-120 .
So Tito and all other who predict 100+ for amat, I appreciate your "rational exuberance", and thank you all for your valuable insight.
Just my 2 cents. (please excuse my wordiness)
Cheers to all those long amat.
Miklosh |
