Eric,
The numbers you used for AMAT, $2.19 for 97 and $3.31 for 98, are out of date. AMAT predicted $2.46 for 97 in their conference call, and some analysts have already raised it. As Teri has been posting, many 98 estimates have moved up to the $3.80-3.90 range. I believe that a $4.00+ concensus 98 estimate could support a price of $100 because 98 will be the first year of what is likely to be at least a 5 year recovery. AMAT is talking $10-15B in revenues "early in the next century". This could result in $10-15 EPS (more likely $9-14). As the concensus 98 EPS moves toward $4.00, the price will move toward $100. As long as industry BTB supports AMAT guidance, the price will rise with rising 98 concensus EPS until the next earnings report and conference. AMAT will weaken if the overall market or the tech stocks weaken, but it will fall less and rebound faster than the market.
AMAT has been the semi-equip leader in this transition phase from downturn to recovery and it is likely to be very strong for a number of years, but as the recovery gains strength, there will be periods where some of the other smaller semi-equips will outpace AMAT while they play catch-up.
There has been much concern about AMAT being ahead of itself, and SI threads tend to promote trading, but I believe long term investors should hold AMAT more tightly when temptations to sell arise. There will be some short term traders who will sell high and buy back lower and they will post their successes, but remember that nobody is going to post their failures. I believe that the semi-equip industry has a UNIQUE position in American industry and that some have bought into these companies at prices that will be looked back at as "bargains of a lifetime". Don't be fooled by talk of "better uses of your money", because many of these are crapshoots and again mostly the successes are posted.
Cary |
