re: Lehman's pitch, and other thoughts:
1. no attempt at timing: they don't guess when they think the upturn will happen (which quarter of 1999), or when the next cycle will peak.
2. interesting that they say EPS will be 7$ at next cycle peak. They're either expecting a long cycle, or a doubling of EPS for several years (1.25 in 98, 2.50 in 99?, 5.00 in 2000?, and reach 7.00/share EPS rate during 2001?). So, are they saying sell when revenues reach 10B$?
3. AMAT (stock and company) are holding up better than the others. And the more brutal this double downturn is, the better position AMAT will be in, relative to it's competitors, when the upturn happens.
4. They're probably right about the sharp upward move once we breach the 40 barrier, and all the momentum guessers pile on. Of course, that will be a level 1/3 above today's price, which may not be the bottom.
5. I think the Mid-May step down shook the last momentum guesser out of the stock. Value investors started to buy at 32, and supported the stock heavily at 26-28. We'll see how long support lasts. Lehman thinks it'll hold. I'd like to see another run to the 32 or 35 level, and then another test of 26, in the fall. I'd like to see if the Japanese mean what they say about restructuring, and the Chinese mean what they say about not devaluing, and the Koreans take out DRAM capacity in the face of Micron's challenge, and Intel stop it's revenue slide.
6. I see 3-6 more months of bad news in front of us. More of the things on my "bottom indicators" list are starting to happen: (consolidation in semis and semi-equips, capacity being taken out, a more realistic appraisal of the stocks by the market =lower prices and a later upturn date).
7. However, the most important thing is that massive overcapacity still exists. Intel's plant closings is proof of overcapacity in CPUs, now matter what anyone says about allocation. DRAM may stay in overcapacity till Micron spends its last dollar at the end of 1999, or is the only company on the planet left making DRAMs (thier plan is to make one or the other happen). DRAM companies are looking at the yummy margins in other areas, crashing the party, and making everyone else feel their pain. |
