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Strategies & Market Trends : Gorilla and King Portfolio Candidates -- Ignore unavailable to you. Want to Upgrade?

To: willkm3 who wrote (29393)	8/4/2000 2:39:50 PM
From: freeus	Respond to of 54805

Interesting. Thank you! Freeus

To: willkm3 who wrote (29393)	8/4/2000 2:48:57 PM
From: FR1	Respond to of 54805

I have a simple analysis question that I hope somebody can help me with. I frequently hear things like the following: On August 2, 2000 SSB (Solomon Smith Barney) said the following: As a result, we are lowering our price targets as follows: AMAT to $95 from $140 (25x our CY01 EPS estimate of $3.83) My question is, where do they get the 25x figure? The first thing I do is go to Microsoft Investor and get a chart of historical earnings for AMAT. Then I add a column, called % Gain, to show me the Y-Y % growth. I also add a column, called X, to see the multiplying factor that gets us from Y-Y. AMAT Revenue - Quarterly Results ($ Millions) FY (10/00) X % Gain FY (10/99) X % Gain FY (10/98) 1st Qtr 1,667.00 2.25 55% 742.5 0.57 -43% 1,307.70 2nd Qtr 2,190.00 1.96 49% 1,117.60 0.95 -5% 1,176.30 3rd Qtr NA 1,433.50 1.62 62% 884.5 4th Qtr NA 1,565.50 2.33 133% 673.2 Total 3,857.00 4,859.10 1.20 20% 4,041.70 Earnings Per Share - Quarterly Results FY (10/00) X % Gain FY (10/99) X % Gain FY (10/98) 1st Qtr $0.40 5.71 83% $0.07 0.23 -77% $0.30 2nd Qtr $0.54 3.00 67% $0.18 0.95 -5% $0.19 3rd Qtr NA $0.31 4.43 343% $0.07 4th Qtr NA $0.40 -1.60 -260% ($0.25) Total $0.94 0.98 $0.96 3.10 210% $0.31 If you look at AMAT’s current year earnings, they would be $1.88 for the year if they just remained the same and did not grow. So it is reasonable to assume a $3.83 annual earnings for AMAT for next year. I am now trying to see how they came up with the factor of 25 to multiply the annual earnings by to get the future target price of AMAT. Any help will be appreciated. Franz

To: willkm3 who wrote (29393)	8/5/2000 12:31:30 PM
From: the dodger	Read Replies (2) \| Respond to of 54805

"...These questions caused me to do a little mkt cap research, which is listed below. _______ MktCap__ 6-30-95__ Gain CSCO___ 459 B____ 19 B____ 2300% INTC____ 426 B____ 23 B____ 1700% There's something that's been gnawing at me, and I think it needs to be pointed out about INTC specifically, and certainly pertinent to a lot of our other "gorillas"... While it's certainly true...we've seen Intel increase it's market-cap from 25B in 1995 to a current 425B in 2000...which IS a 1700% increase. BUT... Isn't a core characteristic of a gorilla supposed to be "explosive earnings"? And if so, I think it should be noted that Intel reported 3.5B in profits in 1995....and 7.3B in 1999...which is actually little more than a doubling. Now that's very respectable -- but it's certainly NOT spectacular. And that's telling me that the REAL "tornado" occurred in INTC's PE ratio and NOT in their bottom line. In other words, we owe about 80+ cents of every one-dollar market-cap increase to PE expansion -- and that's bothersome, because... According to the numbers at Quicken.com... INTC's 3 year revenue growth is 45.70% lower than their industry average, INTC's 3 year earnings growth is 48.33% lower than their industry average. INTC's 3 year cash flow growth is 17.08% lower than their industry average. And the concensus of 25 analysts is for INTC to grow earnings at only 11.8% from FY2000 to FY2001...yet it's trading at a 45.5 PE (based on trailing earnings). So is the explosion in their PE ratio truly justified?...or are we all merely beneficiaries of "momentum investing" because gorilla-gaming has gained in such popularity in the last couple of years?...i.e...investors buying INTC merely because it's been labeled a "gorilla" rather than its fundamentals. And if the latter half IS true, there's at least the potential for Mr. Market to deliver a lot pain via INTC in the next couple/three years. td