Bob, at some point, the "rubber has to meet the road". By that I mean, either stock prices will have to go up to match present earnings predictions, or earnings will have to come down to rationalize lower stock prices.
Take LRCX as an example. Today it went down 1.64 to 43.50, or a loss of 3.6 percent. At Friday's close, LRCX was 45.14. In accordance with the latest consensus estimate, LRCX is estimated to earn 2.37 for FY-06(June), rising to 3.17 for FY-07, that's a gain of 34 percent. Since 5/5, LRCX has gone from 53.49 to 43.50, a loss of 19 percent.
As shown in this past weeks tabular report,
Message 22494205
LRCX had a forward PE of 14 and a PEG of 0.81. Now if the stock goes to the 25 dollar range, as suggested by Mr. Hickey as a result of falling earnings - say earnings fall by 50 percent, the forward PE would still be 14 and the PEG would still be 0.81.
What does the "market" expect at this point? Darned if I know, but it must be really bad. In one post I read today,
Message 22498843
the following was stated,
<<There is expected to be a slight oversupply of NAND-based flash memories in the marketplace for 2006, although supply is projected to become tight in the second half of this year, according to an analyst.>>
The title of the article, would you believe, is as follows,
<<Memory Bulletin: NAND glut seen in '06>>
So if the NAND supply is going to be tight in the second half of this year, LRCX will already have 6 months of FY-07 "in the bag". Hard to believe earnings in the first half of 07 would drop to near zero to meet a reduction of 50 percent in earnings for FY-07.
Anyway, it is useless to argue with the market. It is going to do what it is going to do. Facts, and reasoning, do not matter. At some point, I don't know when, sanity will return to the market. and perhaps so will "irrational exuberance".:)
Don |
