re: "good news takes things down (expectations met, no future), and bad news drives 'em up (can't get worse ...)", and "percentages are RATIOS, not raw data"
Total bookings were down. That's raw data. Nat semi. warned (that's what, the 9th semi to do that, I've lost count). So, the stocks went down on 2 pieces of bad news. Entirely rational and reasonable. The irrationality was the April peak, at a P/S of 12, and the 1996 low, at a P/S of 0.9.
At this point, AMAT (at a P/S of 5) is in the upper middle of its longterm valuation range, and is, IMO, approximately fairly valued. However, my experience with this stock is that "fairly valued" is just a very temporary stage, which the stock briefly hits while in the midst of swinging from absurdly undervalued to absurdly overvalued (or vice versa).
The interesting question now is: what is going to happen with bookings? The choices are:
1. a modest decline in bookings, and then a prolonged stabilization at high levels. Bookings peaked in the 1.5-2B range in early 1996, and again in late 1997. That was also the level at which bookings stalled for a while in mid/late 1999. This could be considered a natural "landing stage". If bookings were to stabilize at that level, through 2002, the stocks could be hitting new all-time highs in 2001 or 2002.
2. bookings have now turned, and will continue on down, until we have an undershoot, as severe as the previous overshoot. This is the classic pattern. Bookings peaked, this time (if it was the peak, one month-on-month decline does not make a pattern), at a level twice as high as the previous two peaks. The semi industry total profits are not twice as high. Semi-equip bookings have to be supported by semi earnings (not semi sales, not hopes and dreams of gaining market share). |
