Hi Rob,
You appear to have an appropriate view of this company's near term situation. I am more interested in the longer term situation and did a "back of the envelope" calculation that I wanted your comment on. Here it is.
Based on my recollection of Len's recent comments...
Sometime in 1999...
4,000,000 Winchips/year x $70.00 apiece = $280,000,000.00/yr added to IDTI's annual sales. Pre-tax margin = $40.00/$70.00 = 57%/Winchip. After tax margin = 57% x 66% = 38%/Winchip.
38% x $280,000,000.00 =~ $106,000,000.00
$106,000,000.00/85,000,000 shares = $1.25/sh
$1.25/sh x p/e multiple of 30 = $37.50/sh
This calc assumes that the rest of the operation runs at a net profit of zero, which has been pretty close to the mark lately. The 30 multiple assumes that the street is impressed that they (IDTI) actually do what they say they will do and if there happens to be a chip boom in addition, will probably be conservative.
So, I come up with a 1999 target price of $37.50/share.
Do you agree that this is a possible or probable scenario? I would like to know what you think.
Long about 6,000 shares worth and still tempted to load on more during IDTI's continuing funk (which, incidentally, I doubt will let up anytime soon).
Don |
