<<During the downturn, Sales don't fall as much as bookings. >>
Maybe, but earnings fall harder than bookings. Don't you remember a year or so ago? If I remember correctly, AMAT's earnings fell from about .50 per quarter to a little over 0.
Ian, I know you are bullish on the sector, but this is just silly. The BTB is presently predicting a 20% decline in one month's future revenues (which may or may not be spread out over time depending on how fast the recovery is). Just about everyone in the sector is taking steps to cut production in order to save money against future sales declines, even to the point of laying off employees.
I feel sure the sector will recover at some point, but it jurst isn't going to be as soon as we'd hoped. Saying that earnings have been growing is a non-factor. Early 1997 was a low-point; the earnings now coming out reflect the growth in orders (and the increase in stock prices) at that time. Revenue increases were priced into share values a long time ago.
The point is, earnings are not going to grow as much as hoped in late 1998 and early 1999. Companies are buying from old budgets. Pushouts are bad, but not as bad as the lack of future orders, especially given the long time-frame from order to realized income for much of the front-end equipment.
If earnings are solid, but orders are slow, and current orders reflect revenues a year from now, which one is the more accurate predictor of future stock price? A BTB of .80 is terrible news. On an annualized basis, anything less than 1.05 means that the company affected cannot even be called a "growth stock". We will, in effect, need to see a one month BTB of 1.30 at some point just to keep the industry growing at the same rate as the general economy.
The trick here is to be long when the BTB climbs. The market is not only trying to look way beyond current revenues, but beyond the current BTB. For someone like Cymer or ASM, this means that current stock price attempts to predict revenues/earnings two years from now. Revenue growth with poor bookings just isn't fooling a lot of people. |
