Applied notes that it currently has $1.5 billion in
cash, a handy war chest to pick off competitors with low stock
prices.
But in the meantime, Applied's own stock price has swooned,
falling to around $29 now from its 52-week high of about $54 on
Aug. 20. (Prices have been adjusted to reflect a 2-for-1 stock split in
October.)
Rebound Play
The upshot, according to analysts and portfolio managers:
Investors with long-term horizons and strong stomachs may be
wise to play the likely rebound of semiconductor capital-equipment
stocks by placing their bets on Applied Materials.
"When investors come back to the group, the first stock they'll come
back to is Applied," says analyst Milind Bedekar of Prudential
Securities in San Francisco, who rates the stock a "buy" with a
12-month price target of $ 41.
Of course, while bullish over the long term, Mr. Bedekar and most
of his peers have reacted strongly to the Asian financial crisis. Last
week, Mr. Bedekar slashed Applied's per-share earnings projection
for fiscal 1998 about 20% to $1.79. The Wall Street consensus for
the year ending next October is $1.99, according to First Call.
So dire is the situation in South Korea -- where critics say
government-subsidized chip plants have expanded too fast and have
undercut pricing -- that Mr. Bedekar predicts most orders from
there will be postponed or canceled outright in 1998. That, he
figures, will cost Applied about $350 million in fiscal-year revenue.
"Korea is completely shut down," says Mr. Bedekar, whose
stock-price target for Applied prior to revising his forecast was $57.
At the same time, he predicts that problems in Japan and other
countries will shave another $300 million or so in fiscal 1998 sales.
The above came from the wsj via the Amat thread.
I think it illustrates why it is not an Fsii mgmt problem but a sector problem. |
