Forum Archive Index - April 2001

["Peter Maiden" <pmaiden@xtra.co.nz>]

Last weekend when I started this topic I mentioned Micron. At last weeks price of $36.82 it was trading at 5.6 times sales.

 

Semi-conductor companies have had an interesting week.  Cypress  reported ``The first quarter ended worse than we expected. We barely turned positive on bookings, with cancelations offsetting virtually every order we received" and casting a pessimistic outlook for the next quarter.

 

Micron stock levels have gone up to an astronomical level - and they continue to churn out more. One report says that they have enough chips for 25% of the PCs that need to be made in the next year. Low demand and high stocks is affecting margins which lead to their last quarters negative earnings.

 

In spite of this negative background Micron's price went up by 26% last week and is now $46.41.

 

As usual analysts find it hard to assess what is going to happen. They have Micron projected earnings this year ranging from $4.4B to $7.9B.  On these forecasts Micron is trading at high 3.5 to a stunning 6.2 times sales.

 

One analyst has a target price for Micron at $75 - wow, maybe seen that Baycorp trades at 14 times sales and thought he had better raise the ante on Micron.  

 

The resurgence in semiconductor stocks appears to have been driven from an analysts upgrade for no better reason than "We are upgrading the semiconductor sector from neutral to outperform based upon anecdotal order and shipment data that is so bad it cannot continue for long.............."

(Full story linked from Yahoo http://www.upside.com/Money/3ad5ed5023_yahoo.html

 

Gerry's competition has raised the interest in the Nasdaq. Whereas most were predicting a fall the last week has seen a fantastic rise in the Nasdaq.

 

Fundamentally the Nasdaq should be lower - Micron is a typical example of many totally overvalued stocks that make up the high PE of the Nasdaq that nobody seems able to compute.

 

However it appears that fundamentals and rational thinking is not what drives the Nasdaq. It is looking more like a casino and exists for the traders, who care very little for things like revenues and earnings.

 

The Nasdaq has fallen from over 5000 to under 2000 but fundamentally nothing has really changed in the behaviour of those trading / investing in these stocks.

 

As such Snow Ball is most likely right in that the Nasdaq will increase in the short term. Whereas my guess, in the competition, for the end of April was 1400 it would not surprise me if it was in the 2100 - 2200 range.

 

That is the nature of the beast called the Nasdaq ..................maybe worth a punt on Advantage?

 

Cheers

 

Peter