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Technology Stocks : Cymer (CYMI) -- Ignore unavailable to you. Want to Upgrade?

To: orkrious who wrote (24985)	6/22/2000 3:00:00 PM
From: Robert Douglas	Read Replies (4) \| Respond to of 25960

Jay and everyone, I just got through reading all the reports that Brett Hodess from Merrill Lynch put out this week. It seems pretty clear to me that two things have to happen to move the stock up appreciably from its current level. First, the industry cycle needs to keep going for at least another 18 months. Hodess seems to think that it will. Second, Cymer needs to up its net margins to levels comparable to their more highly-valued peers - AMAT, KLCA, NVLS - On this count, Hodess is predicting that this will happen to a degree. His 2001 earnings model calls for 16.5% net margins on $420 million in sales. (admittedly conservative) His price target, based on these projections, is only $60. Clearly, the net margin needs to rise into the low 20's to really get this stock moving. I don't know why a near-monopolist like Cymer can't do this. His forecast for AMAT during 2001 calls for 23.4% margins, 24.4% for NVLS and 20.5% for KLAC. A more optimistic model (mine) would be a 80% market share (vs. Hodess's 70%) on 900 units in 2001 (vs. Hodess's 850), an ASP of $550,000 (vs. $530,000) yielding total revenue including spares of $528 Million. A 20% margin on this would yield profits of $105.6 M, or $3.41 a share, on 31 M shares. Why shouldn't Cymer charge a bit more for a product that no competitor can produce in quantity; that has proven itself to be reliable? If not at this point in the cycle, when? I also am predicting that a weaker dollar will help in the pricing matter. If you want to look at the reports yourself, PM me your email and I'll send them to you in PDF format. -Robert