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

To: The Ox who wrote (85430)	8/5/2020 11:46:00 AM
From: Clear Eyed	2 Recommendations Recommended By Return to Sender The Ox Read Replies (1) \| Respond to of 95487

Ox, Ok let's look at it another way beyond the points stated previously. The S&P 500 is trading at 20.3x 2021 consensus EPS forecasts. ASML trades at 31.3x 2021 consensus EPS forecasts. LRCX IBES consensus forecasts for 2021, 2022 and 2023 are $20.73, $24.03 and $27.65. Now, for the last 8 quarters LRCX has never missed a IBES consensus estimate. In fact, LRCX has beat consensus estimates by a median % of 5.7%. So let's give LRCX the benefit of the doubt of consistently conservative consensus sell-side forecasts and gross up median estimates by 5.7%. That takes them to $21.91, $25.40 and $29.22. So, using those adjusted up by 5.7% consensus forecasts and then calendarizing (take half of 2021 and 2022 for LRCX because they have a June FYE) and you arrive at $23.66 in CY 2021 earnings and a P/E of 16.3. So then you have to ask, does LRCX deserve to be trading at a 20% valuation discount to the S&P and a 48% discount to ASML. I would argue, strongly, no it doesn't deserve those types of discounts. Given LRCX outlook and market position, I think that LRCX deserves to be trading somewhere between the S&P's valuation and ASML's valuation. You choose the multiple: 23x? 25x? Lots can and will happen over the next couple years. Nothing goes in a straight line. But going back to the original points: Installed base business is now 1/3 of LRCX and that is a perpetual growth machine, we are just going into an upcycle in memory spend, Lam is making significant market share inroads in logic and foundry, and LRCX has a sufficiently attractive valuation and free cash flow generation that financial engineering (i.e. share repurchase) should accentuate improving operating trends. You think they've run too far too fast and are looking for the arguments that there's a lot left in the tank. For all the reasons indicated, I believe there sure is.

To: The Ox who wrote (85430)	8/5/2020 12:40:27 PM
From: Sun Tzu	Respond to of 95487

Semis are highly cyclical. And that is why I gave you my PE10 answer. Whether one is long or short a stock has much to do with his time frame. What works for day-trading will not work for retirement funds. You never explained what timespan are you looking at. I personally think that in the medium term the semis are done. You can see this in the chart of many bellwethers such as KLIC or MU. But if your timeframe is in weeks or even a few months, then the issue is immaterial. Just go with the momentum.