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Politics : Formerly About Applied Materials

AMAT 261.90

+0.4%

Dec 26 9:30 AM EST

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To: Andreas who wrote (41993)	2/10/2001 1:42:03 PM
From: brunn	Read Replies (2) of 70976

I would not be surprised to see earnings for 2001 be guided down by 50% (to around $1 and change). In that case, amat is nowhere near the bottom. In 1998, AMAT's earnings fell more than 50% from .66 in 1997 to .30 in 1998. Its P/E never fell below 30 in 1998 based on 1998 earnings (11/.3=33 P/E). It is possible for AMAT's earnings to fall to $1.00 this year and the P/E to rise to the 30's once again if a turnaround in profits is forecast. Therefore, AMAT's price could conceivably hold its 52 week low despite further earnings downgrades. How much or little AMAT is earning at the bottom is less important than timing the bottom. As an extreme example, if you use P/E to value AMAT and its earnings fall to breakeven the stock price would fall to 0. Also, who will care in May or June about earnings this year of 1.00, if there is a perception that earnings will increase back to previous highs next year--just as what occurred in 1997 and 1999?

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