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Technology Stocks : Applied Materials No-Politics Thread (AMAT) -- Ignore unavailable to you. Want to Upgrade?

To: Cary Salsberg who wrote (9988)	5/23/2004 5:06:05 PM
From: Sam Citron	Read Replies (1) \| Respond to of 25522

Speaking of Barrons, here are Michael Santoli's latest tech comments: "It's always possible the stock market could rally strongly without technology shares playing a leading role. And jumbo jets can stay airborne with one engine out. But neither is the preferred or most common means of getting where you want to go. If there is to be another meaningful upward move in stocks soon, tech stocks will probably have to move again to the fore. A chart of the tech sector's strength relative to the broad market matches up tightly with the market's post-bubble renaissance. For those looking for reasons for tech to sprint, the good news is that the sector has become less expensive relative to its projected earnings over the course of this year. The sobering counterpoint is that the sector is still trading at a premium valuation to the market that was rarely seen prior to the tech bubble of 1999-2000. Technology earnings -- excluding, as most tech firms do, the effect of employee stock options -- have been impressive, surging 67% over year-earlier levels. The trend in profit forecasts for tech has also been positive, with estimates for the current year climbing about 6% from the start of the year. With tech stocks declining a bit more than the overall market this year, those profit gains have slimmed the forward price-earnings multiple of the sector from the high 20s to about 23. That has brought technology stocks' P/E relative to the market down from a 64% premium to the current 42%. Yet the 20-year median premium afforded tech stocks has been 30%, so tech remains expensive even by the standards of its own history. Based on price-to-sales relative to the broad market, tech is back at levels seen only from early 2000 through mid-2002, not a great time to bet on tech. Prior to that period the relative price/sales ratio last hit today's levels briefly in the mid-'Nineties. Unattractive valuations alone wouldn't prevent tech stocks from rising, should risk appetites revive. The incipient mania over the Google IPO could always inflame another mutual infatuation between investors and Silicon Valley. And growing confidence among tech CEOs, trumpeted in conference calls and slick investor presentations, might lead Wall Street to begin mistaking cyclical business improvement for another secular Golden Age for tech companies." online.wsj.com [selection bolded for emphasis: mine]