Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

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

To: LindyBill who wrote (39954)	3/3/2001 11:27:18 PM
From: Jacob Snyder	Respond to of 54805

re: NTAP and unreasonable valuation: Well, now, let's see. Normally, I like to buy a company at a PEG of 1. That requires guessing the PE (since I use forward 12M earnings), and guessing the LT growth rate. What will NTAP earn next year? In the current market environment, investors won't pay for 2002 or 2003 or 1010 earnings. Unfortunately, with the credit spigot shut off, and the possibility of a recession, NTAP's earnings for 2001 are in a lot of doubt. Consensus, I think, is 0.52, but I doubt that happens. Not when your customers are seeing their assets auctioned off on Ebay, and their stocks delisted. As CSCO and EMC have found out, all spending is discretionary, even routers and storage. OK, as a WAG, I'll say they make 0.40 in 2001. How about the LT growth rate? Let's be real generous, and say 50%/year. Nobody grows at that rate longterm, but let's suspend disbelief, and see the rosiest of possible scenarios unfolding in the future. Then: fair value = 0.40 X 50 = 20 for NTAP I showed this chart to my wife: bigcharts.com, and, without knowing anything about the company, she said, "It looks like it was flat for a long time, and then suddenly took off at the end of 1999. And it looks like it's going to give all that back, so why don't you buy it when it gets back there, at about 16. Then you'll know the hype is out of it." That's as good as any other advise I've heard.