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Technology Stocks : WDC/Sandisk Corporation -- Ignore unavailable to you. Want to Upgrade?

To: Prognosticator who wrote (18794)	1/29/2001 6:23:35 PM
From: Art Bechhoefer	Read Replies (1) \| Respond to of 60323

The $4.10 includes a one-time gain on the sale of stock in a foundry in Taiwan. The lower figure is operating earnings, which actually would have been closer to $1.60 per share, excluding the one-time gain and the taxes associated with that gain. The estimate for year 2000 was about $1.50 per share, so it appears the actual earnings from product sales, licensing fees and royalties exceeded estimates. For the current year, the company expects revenues to grow at a slower pace for one or two quarters, but the critical guidance from the company is that they would be disappointed if revenues were ONLY 30 percent above last year. It seems to me that estimating the earnings for this year is highly dependent on both the health of the economy and a continuation of extremely fast growth in demand for non-volatile storage products of all types. An estimate of 50 percent earnings growth (which would be well below that for 2000) would justify a price-earnings ratio of at least 40, even in this market where tech stocks have been battered. Thus, if you make conservative estimates of earnings and a reasonable price-earnings ratio, you should see the stock selling perhaps around 70 or higher. Meanwhile, if you compare the low debt level and existing PE with other semiconductor companies, and particularly those involved in the design and manufacture of flash memory, you can get even a better understanding of why the present price is way too low. In my investment experience of more than 45 years, what usually happens when a stock sells well below where it should rightly sell on the basis of its fundamentals, it usually gets acquired. If nothing else, it is likely that some company with long term interests in flash memory will take a significant position in SNDK, and the price will once again return to a more normal level. Note also that when the stock was recently added to the S&P 400 Index, it was selling in the high 60's. Art Bechhoefer