Here are some thoughts Re: lam's great valuation:
> 1. According to yahoo the current book value is at $15/shr, and yet > the stock is selling at $11/shr (i.e. about 25% below book value).
Of course you realize that Lam is currently losing $. As long as they continue to do that, book value shrinks with it. Book value of $15 today could be book value of $10 this time next year (totally hypothetically).
>2. The stock is selling at half its revenue (i.e. P/S is at around $0.4).
This is a very compelling 'positive' for Lam. Lsi is beaten up pretty bad, but even it is still selling better than 1.x times sales, a firesale in any other market. Again, though, to play devil's advocate, if sales decline, this ratio may stay low with it.
>3. The company is in a cyclical industry that when (and not if) things turn up has a huge upside potential (unless I am missing something).
This is clearly true, and readily acknowledged by those who follow this industry. Big problem here is that who knows when we'll turn +. In the meantime, the semi's and equips continue to slide into the inner bowls of hates.
Having said all of this, my take is that LRCX is a screaming buy at these levels. If it gets anywhere near the $5.00 share earnings of the past peak, this is a $75 stock somewhere in the upper crest of the next upswing, assuming it stays independent. Course that's a ways off, but the for a potential 500% return, it's worth the wait, if you can stomach it!
JMHO,
John Dodson |
