SB,
NTAP is a fine company. I believe they will perform well going forward & folks investing at current price levels should do well if they are LTB&H.
They say the market is a forward looking mechanism, somewhere in the 6 to 9 month range. Here's where I see the problem near term for NTAP...........
This economic downturn is impacting NTAP like numerous other tech & non-tech companies. NTAP is in an earnings recession. Pro forma earnings for the past 4 qtr's is 32¢/share. NTAP's trailing P/E is 85 as of COB today (YAHOO charts include one time charges, so they show a much higher P/E ratio). Some folks will think this is high & others will not. My concern is where that P/E is going in the next 6 to 9 months.
Consensus for the next 9 months is for continued earnings recession YOY.
For the current qtr, estimates are for NTAP to earn 2¢/share. In the year ago qtr, NTAP earned 9¢/sh. Trailing earnings will drop to 25¢/sh. If NTAP share price remains unchanged until then, their P/E will grow to 108. If share price goes up, that P/E will increase 4 points for each $1 increase in share price.
Comparisons continue to get worse in the following qtr. Consensus is for 3¢/sh with prior yr earnings coming in at 10¢/sh. Trailing earnings will drop to 18¢/sh. If share price remains unchanged over the next 5-6 months, NTAP's P/E will be 150. If share price goes up, that P/E will increase 5.6 points for each $1 increase in share price....... IOW, if NTAP is trading @ $36/share in 5-6 months, their P/E will be 200.
By 4/2002, consensus is for NTAP to be at 20¢/sh for the prior year. If NTAP's share price remains unchanged for the next 10-12 months, it's P/E will be 135. By now, it's obvious what the P/E will be if share price is any higher 10-12 months from now.
Perhaps NTAP will beat those estimates by 100%. Then the above P/E's will be 1/2 of what I calculated. IMO, if indeed they beat estimates by 100% for the next 3 qtr's, it could be argued that a share price significantly greater than $27 is warranted a year from now. I also believe a strong argument could be made for less than stellar performance in NTAP's share price over the next year if they only exceed consensus expectations by 50% or less.
BWDIK?
It's JMVHO. Any comments?
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