Hi Joseph,
I can't answer your question about the analysts vs. the CEOs.
I have a few thoughts and I would welcome your opinion. The bar has been set extremely high for the semi-eq industry. The 'fault', if there is such a thing, falls on the incredible growth shown by these companies and the absolute mania that the stocks went through during 1999 and the 1st Q of 2000. Many industry stocks went up hundreds of percentage points in a very short period of time. The returns made by the investors, who were smart/lucky enough to buy into these companies during the downturn in 1998, were beyond most people's wildest expectations. Wall St finally came to their senses this year and now they are going to 'punish' the stocks for having such a wonderful run, IMO. The perma-bears will just cry tulipmania and attempt to equate semi-eq stocks with questionable dot com companies. All 'tech' stocks will once again be lumped together for the purposes of talking down the stock market.
Analysts can 'punish' stock in many ways, the most common way is to set outlandish growth targets. They will use astronomical valuation methods and 'justify' these targets as long as the stocks are running up. Once they push these crazy valuation methods to the absurd level, all they have to do is wait for the companies to fail to match these silly criteria, or better yet, decide that the 'cycle is over'! Everyone starts to bail out and the self-fullfilling prophecy is created.
I think the CEOs get caught up in the astronomical valuation methods, since they believe very strongly in their companies and see the wonderful growth that's happening. They want their valuations as high as possible and get blinded by dollar signs during the run up. And who can blame them?
The reverse happens as well. Stocks get taken out behind the proverbial woodshed and beaten beyond reason, as we saw during 1998 and we are starting to see it happen again this year.
Whether industry growth starts slowing in 2001, 2002, or beyond, it will slow since the growth rates being shown currently can't possibly be sustained indefinitely.
The key is to buy good companies during the 'beaten beyond reason' season. Many companies have fallen dramatically from their highs but are still up substantially from their washout 1998 lows. I think it's important to keep this type of 'balanced' view before buying.
BTW, The move to the 300mm process will take a few years and I'm not sure anyone will have a fully operational 300mm fab running before mid/late-2002 (but I could be wrong on this). There should be plenty of business for the semi-eq companies during the next couple of years. The worry-warts are convinced that this will coincide with the overproduction cycle causing a major reduction in margins and pricing power for the industry. |
