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Technology Stocks : EMC How high can it go? -- Ignore unavailable to you. Want to Upgrade?

To: Crystal ball who wrote (12415)	3/8/2001 2:13:36 PM
From: DiB	Read Replies (2) \| Respond to of 17183

Cb, I like NATP, but imo there is flaw in your logic. You cannot assume that the current PE does not already imply earnings growth. What you are doing, is multiplying earnings times PE times growth, and I don't think this is right. When I try to come up with price targets, I usually multiply future earnings estimates (0.52) times growth (130), which in this case will give me target price of about 66 in a year. This obviously assumes that the company will make their numbers. JMHO.

To: Crystal ball who wrote (12415)	3/8/2001 3:45:13 PM
From: Jacob Snyder	Read Replies (1) \| Respond to of 17183

I'm not sure whether I should even respond to this. Your equations are wrong. First, you say NTAP is at a PE today of 112. That's using trailing 12M EPS. OK so far. But there is no reason at all to use that as a starting point. Why is a PE of 112 today reasonable? You said that you used a growth rate of 30% for NTAP. How can you rationalise a PE three times the growth rate as reasonable? You might just as well have used the PE when NTAP was at 152. Plug that into your calculations, to get some even more absurd expectations for the future. OK, then, for some reason, you multiply today's PE by 2.3, to get an expected PE of 257?????? The only time people took those kind of PEs seriously was during the 1999-2000 bubble, which is over and we won't see those valuations again, ever. It's not even reasonable to multiply today's stock price by 2.3, since today's stock is at a PE far above the growth rate. Calculate what NTAP should be today, given a 30% growth rate (that means a PE of 30 is reasonable). Then, multiply that by 2.3, to get your expected stock price in 2004. Investors are no longer paying for earnings 2,3,4,10 years out. They will pay for earnings 6-12 months out, and even then you should discount it if those earnings are not reliable. And, as we've seen, even the big established companies have seen 12M forward EPS estimates fall radically in the last few months. NTAP is not a big company, and its niche is under attack by a company 10 times as big (EMC). Oh, and I didn't say that NTAP would make 0.52 in 2001. You did. I said 0.40, which I think is reasonable, given the carnage among NTAP's customer base.