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Politics : Formerly About Applied Materials -- Ignore unavailable to you. Want to Upgrade?

To: zsteve who wrote (27218)	12/16/1998 3:27:00 PM
From: Jacob Snyder	Read Replies (2) \| Respond to of 70976

8 of 30 dow companies issue earnings warnings.......... we're going to bomb Iraq.......... the president is going to be impeached......... Meanwhile, AMZN is up 50+ points today, based on an analyst saying the stock is worth 400$/share. At that price, it will have a very reasonable PE of 28. Here's the catch: the E in that PE is not trailing, or this year's, or next year's, or the next or the next or the next or..........the E is from (this has me rolling in the aisles)......the year 2004. And people are buying the stock based on this "analysis". About 6 months ago, I posted that I'd noticed a trend toward justifying stock prices, based on forward earnings further and further into the future. What's happening is that momentum guessers are trying to pretend they aren't totally ignoring the fundamentals. But the numbers just don't look good if you use historical facts, so you have to go further and further out on a limb to make the numbers look pretty. What does this have to do with AMAT? The justification for AMAT at 40 is exactly the same as for AMZN at 280. AMAT is overvalued if you use trailing earnings. So, we ignore trailing earnings. AMAT is overvalued based on 1999 earnings. So, we ignore 1999 earnings. AMAT is only fairly valued if you use earnings more than 12 months into the future. But this is so far over the horizon that noone has any good track record of predictions. For the last 3 years, the "experts", have been wrong a lot more often than they've been right. This thread has been consistently too optimistic. See our predictions from Feb. 1998 for confirmation. The people in the best position to know (like AMAT management), have made some horribly expensive mistakes (like the 300 mm tools development) based on very inaccurate forecasts of future demand. Even if earnings projections for AMAT in 2000 and beyond do turn out to be correct, there is plenty of time before then for investors to have doubts, and swing from manic to depression. I predict that AMAT goes below 30 several times in the first half of 1999. When that happens, I'll buy more LEAPs to add to my partial position. And if I'm wrong, then I'll hold what I have, and put my cash into HAL when oil prices bottom. Responses based on fact and logic are welcome.