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Technology Stocks : Advanced Micro Devices - Moderated (AMD) -- Ignore unavailable to you. Want to Upgrade?

To: Neil Booth who wrote (10532)	9/28/2000 12:37:50 PM
From: niceguy767	Read Replies (1) \| Respond to of 275872

Neil: Monty's take: "Having to make some assumptions on earnings because there are none (to speak of) so anyone wanting to shoot holes in this can give me an earnings number of their own. I used 25 million. Based on that using a discount rate of 11% and an industry 10 year growth rate of 37% here goes: Given the above earnings and discount rate, AMD must grow earnings at a rate of 43.2% annually for 10 years to justify its current stock price of $24.00. If we assume initial earnings of $25.0 million grow at a rate of 37.08%, and we discount those future earnings at a rate of 11.00%, we arrive at a net present value for the company's next 10 years of earnings of $953 million. To account for potential earnings beyond the 10th year, we estimate a growth rate of 6.00%, a discount rate of 12.00%, and we arrive at a continuing value of $4.71 billion. To complete the calculation we add these two figures together, subtract the long-term debt for AMD ($1.48 billion), and divide by the outstanding shares (311 million) to get a per share intrinsic value of $13.43. NG question:Can you rerun present value using not only your 25 million but 100 million, 500 million ( not too interested in 500 thousand as in previous posting error)and 1 billion...some of us might find such as useful and more realistic benchmarks than yours based upon 25 million!!! Neil's response: Well, Niceguy, the calculations are linear in that number,so just scale the answer as you scale the earnings. Coonclusion: if AMD has a "continuing value of $4.71 billion" based on avg earnings of $25 million, then for $100, $500, and $1,000 million, it follows that AMD has a "continuing value of $19, $90 and $90 billion respectively...$100 billion sounds about right to me at the moment!!!:-). A year from now $200 billion???