Brian,
thanks for Your comments. Fab 25 outfitting is one remarkable job but the REAL boost will come next year from Fab 30 in Dresden. I wonder what the ASP from the K6-3 and the K-7 might be.
Let's approach this indirectly. I assume that K-7 is positioned against Katmai & Xeon, whereas K6-3 is positioned against midrange Pentium-II.
This should mean K6-3 should be targeted in the $200-300 range. Whereas K-7 will be placed into $500-600 and/or $800-900 segment according to the cache used. The analysts feel that 2 million K7 will be sold next year. At an ASP of $600, that would mean $1.2 billion just for the K-7 alone.
My personal favourite is PSR analysis (PRice to sales ratios). Historical data (TTM - trailing 12 months) shows sales level at $2.28billion, or $15,8 per share. At the current $25 price, that means a PSR (price to sales ratio) of 1.56. INTC on the other hand commands a PSR of more than 6. Reason: differential in profitability. Well, with the underlying factors changing, AMD should be able to expand sales nicely:
Let's assume for 1999 (Q1-Q4) - optimistic assumption..
K7 .. 2million units, ASP $600 -> 1.2 billion sales
K6-3 ... 15 million units, ASP $200 -> 3 billion sales
K6-2 ... 20 million units, ASP $100 -> 2 billion sales
NON CPG business -> $300m per quarter -> 1.2 billion sales
$ 7.4 billion sales possible, $51 Sales per share. Now if we take the OLD PSR multiple of 1.56, we arrive at a target price of $80. If AMD manages to become REALLY PROFITABLE (net margin > 10%) then we should also expect expansion of PSR multiple as a possibility. Probable to around 3 for the time being. That could lead to a target price of $240 <g>.
If we just think that the current sales level can be HELD - no growth underneath - then we would yield sales per share around $20. That in turn would warrant stock price of $30.
I know this would be a large step ahead and moves like that aren't done in one day. I admit I feel tempted to sell at $30. OTOH, with possibilities like the thing above I have doubts when to sell <g>
best regards
CROSSY |
