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Technology Stocks : Semi Equipment Analysis
SOXX 309.40+1.0%Dec 5 4:00 PM EST
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To: Return to Sender who wrote (7898)12/29/2002 8:46:41 PM
From: Cary Salsberg  Read Replies (2) of 95530
 
RE: "Your contention that when AMAT earns as much as $1.20 a share again that a stock price peak of $24 to $36 is too low is probably accurate."

If AMAT earns $1.20 at the peak, then a peak of $24 to $36 is reasonable. I think $1.20 is too low because I believe AMAT will exceed 2000 revenues.

RE: "I get an AMAT P/S Trough Valuation of $4.80 based on a median semiconductor industry P/S of 1.9 at trough bottoms."

I don't think P/S is a very good measure for semi-equips during a down cycle because sales are falling, the bottom for sales is uncertain, and the time frame and rate for a sales recovery is uncertain. These are similar to the reasons PEs are not very useful. I have found that price/book is a better measure because it is relatively constant during the down cycle.

RE: "Now maybe it is not likely that AMAT will fall back to 5 year lows especially if the btb has hit a low and is ready to rise back above 1.00. But for the sake of argument lets say that will not happen and instead the btb bounces along bottom making investors wonder if these stocks are not still valued too richly."

I think it is a mistake to consider the BTB, a ratio, without looking at the levels of the two components. Both bookings and billings are higher than the trough in 2001. If bookings rise from here, it will not matter what BTB is, AMAT will have bottomed.
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