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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: Cary Salsberg who wrote (7904)	12/31/2002 1:08:41 PM
From: The Ox	Read Replies (1) of 95530

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. Comparing the P/S from previous downturns is probably not a good metric for AMAT. AMAT's position within the industry has, imo, strengthened considerably since the last downturn, which would justify the increase. Their leading edge technology should allow them to maintain a higher premium (or P/S multiple) from previous troughs. I am in the same camp as Cary with respect to future "peak" stock prices and I believe they will be much higher than many here expect. Of course, I believe these prices are at least a few years away but if one is looking at where AMAT might be when the industry has rebounded from this downturn then I think there is a strong potential for AMAT to earn substantially more than $1.20/yr in the future. It's possible that in a few years, their peak earnings could be closer to $1/qtr instead of a $1/year. Their future numbers will depend on how efficiently they manage their growth and how well they take advantage of their position within the industry. Happy New Year to all WSEA readers! Live long and prosper! mh

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