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Technology Stocks : Semi Equipment Analysis -- Ignore unavailable to you. Want to Upgrade?

To: cluka who wrote (41949)	12/2/2008 2:08:04 PM
From: Pam	1 Recommendation Read Replies (1) \| Respond to of 95616

This is a deeply cyclical industry. Go back and look at bottoms and look at what sort of revenue drops and earnings were. These are the stocks you buy when PE is HIGH and sell when PE is LOW. Look at Gottfried's charts and you will understand. Revenue drop of 30% is nothing new for those that have followed SCE sector for a while. I do not disagree with you. I also see Wennerstrom's tables and see that a lot of semiconductor comapnies have lost 30-50% of their value in just last few weeks alone! Obviously something is wrong and the question is will these companies be ready to buy SCE any time soon or focus on repairing their own business model? Your guide for buying in this sector is Price/Sales. Take a company, look at it's 2008 sales, reduce by what you think drop will be and figure P/S. When you compare P/S between companies, consider their historic margins, size, financial strength. For AMAT 2x at a depressed revenue number has never lost money. KLAC is close, LRCX somewhat lower. I never said P/S would be the thing to look at. Street will look at when the earnings are ready to turnaround. They will wait till the estimates are stabilized and probability of those estimates getting revised upwards increases. P/E ratios or negative earnings may not even matter. Again, these are general comments and there will always be exceptions. Question is if this cycle is different, has something changed, and by how much. Looking at the current stock prices market believes there is more to this downturn. I do not know if things have changed for the entire semiconductor industry but memory players invested way too much capital last 3-4 years and CFOs have dried up! Financing is not possible without profitability and healthy B/S and they are not going to be able to spend as much for next several years. If the demand for their produce increases dramatically and they are able to make some money, financing will again become available, but we are far away from that right now.