Brad,
I don't think AMAT is low-balling, and I don't think the market is agreeing with you. I think Mr. Morgan made it clear that he doesn't know when or how fast the orders will pick up, and I'm sure he is giving conservative guidance to the analysts - but this is different than lowballing, which implies that he expects better, and is guiding them down to a number he is sure he can beat, a la MSFT. MSFT (DELL is another who's been excellent at this) can do that, because their sales have grown every year, and it's just a matter of making a conservative estimate of growth. AMAT cannot do that; sales have not grown every year. What IS clear (as clear as it gets in this business, at least), is that sooner or later, business will pick up, and to some degree, the longer it takes to pick up, the bigger the upswing will be, and in any event, AMAT is gaining market share and managing costs through the downturn exceedingly well. This latter set of facts, IMO, is what the market is applauding. It is now clear that AMAT is a blue chip - cyclical, but strong enough to make money even during bad times, so as long as you have a two year time frame, almost anytime is a good time to buy. That justifies a P/E expansion in many peoples' minds, even if the E is going to stagnate for a year or so.
So my view of yesterday and today's events is not that people are ignoring the prolonged difficult state of the sector, or that Morgan has called a bottom and is just playing coy, but rather that more and more people are recognizing just how excellent a company this is, and are willing to pay an ever increasing premium for it.
Having said that, I must admit I am out of AMAT for the time being, hoping for an entry point when people become irrationally depressed.
Bob |
