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Politics : Formerly About Applied Materials

AMAT 249.89

+3.1%

Nov 26 3:59 PM EST

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To: Proud_Infidel who wrote (13759)	12/23/1997 9:22:00 PM
From: Bura	Read Replies (1) of 70976

Brian, I agree with your assessment entirely. However, let's take a $1.40 EPS for FY98 (even though I agree that $2.08 to $2.15 was conservative). Even at those reduced earnings, AMAT is a steal. At $28, this would give AMAT a PE of 20. The S & P trades at the same multiple. And this would be a 20 PE on depressed earnings. Therefore, if AMAT were to recover in FY99 when most of the Asian situation were resolved (to some extent) and post EPS of $2 to $2.50 with a sustainable growth rate of 25% to $30, we could still see a new high at 55 (as the PE would still be under 25(55/2.25=24). Let's also remember that we are very early in the semiconductor cycle. They usually last at least 3 (and often up to 5) years. The previous cycle ended badly in 1996. That means that we are only in the first of many good years ahead. Coupled with the fact that 1997 was still a slow year overall, and that 1998 could be slowed by the Asian flu, this cycle could easily last until 2001 or 2002. That means that this current fire sale of AMAT will probably look silly in a year or two.

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