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Technology Stocks : Semi Equipment Analysis

SOXX 348.67

+0.2%

Jan 22 4:00 PM EST

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To: Gottfried who wrote (8376)	2/2/2003 7:53:06 PM
From: Return to Sender	Read Replies (1) of 95757

Equity Valuation Trends: Semiconductor Industry wrhambrecht.com Semiconductor industry valuations reflected extreme volatility over the past quarter. After rallying nearly 75% from their October lows by the end of November, semiconductor stocks gave back 23% in December for a net gain of 35% since the October lows. Valuations still seem high with revenue multiples at the upper end of historical ranges. While earnings started to recover in Q2:02, industry profits still seem out of line with market expectations as today’s industry P/E remains 50% above the historical median and at the upper end of historical “pre market-bubble” levels. In addition, a revenue rebound in the first half of 2002, led by inventory replenishment and strong consumer demand, has weakened due to slower consumer spending and continued weak business spending in the second half of 2002. [1] We chose not to break out small caps vs. large caps due to a limited number of historical data points for semiconductor stocks. Gottfried, I decided to take a look at AMAT and INTC to see how they measured out on a P/E and P/S basis compared to past median valuations. Semiconductor Historical Median Valuations: P/S of 2.0 - Today we are at 2.5 Price to cash flow of 14.4 - We are at 18.4 P/E historical median 21x - We are at 30.6 Now as for AMAT and INTC. I find AMAT has a P/S of 4.22 well above the industry even after Friday's warning. INTC is also high at 3.91. On a P/E basis AMAT coming in at 81 is much higher than INTC at 34 Only at price to book are semiconductors undervalued. Those companies that are profitable are being devalued by others that are having to go back to the debt market in my opinion. Many thanks to Les Horowitz who posted this article first. RtS

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