If you believe that 2004 will see a modest, but significant rise (20-25%), and 2005, 2006, 2007 will see the strong rise that resembles historical action (40-50%), then take AMAT's 2007 revenue level, divide by total shares outstanding to get sales/share, multiply by 0.23-0.25, peak after tax profitability to get EPS, and multiply by 25 (20-30), PE multiple of peak earnings, to get the peak price which should occur in 2006.
$5B in 2004, $7-7.5B in 2005, $9.8-11.25B in 2006, $13.72-16.875 in 2007.
Dividing by $1.66B shares gives $8.27-10.17 sales/share.
Multiply by 0.23-0.25 gives $1.90-2.54 EPS
Multiply by 20-30 gives $38-76.2 peak price.
We have time to refine the model. As we get closer to the peak, we will have better data. We can also hope that market exuberance gets us the peak price or close enough, early. |
