No, what hit me most is the huge increase in the tax rate, from 20% in the fourth quarter to 37% in the current first 2004 quarter, but I should have "known better". I expected a slightly lighter quarter (compared to the fourth quarter of last year, see #msg-2185422 from last January). The gross margins are declining a little faster than I expected, but I believe this is due to launch of new technology (90 nm and 200 mm wafers), which are going to pay back in better margins later. They actually beat my Royalties number by a bit. Since this quarter is the weakest, I think they are still "on target" to beat my forecast for the year oof $1.40 (in January it was presplit, so I had $2.80, see that message from above), and that despite a higher tax rate than all of last year. Mind you, since the first quarter is the weakest, my $1.40 is probably too low, since at the current rate of $.34/share, annualized you get $1.36, and the fourth quarter is a very big quarter relative to the othe quarters. They actually raised guidance for the whole year from 1.5/1/75 $B to 1.6/1.8 $B, and I think it is conservative.
Last time I did this analysis, the market handed me my head on a silver platter, it may not be different this time, but for now, SNDK is still delivering top line YOY growth of 50% (last year a bill this year 1.6 bill), and thus my $1.45 expected yearly per share earnings at a max pe of 30 (expecting exuberance to come back) yield $43.5 as a target, pretty close to what I have had, erroneously so far (well we did reach 43 after I first had this $47.5 target). Just goes to tell you, when the FA and TA do not jibe, believe the TA, right that does not look too good and SNDK better repair in the next week the technical damage inflicted in the AH today.
Here's an interesting take on yesterday's gold swoon.
Metals Update
By Peter Grandich April 13, 2004
Gold’s sharp sell-off this morning has caused many in the gold bug camp to think the party is now over. The thinking goes like this:
1- Economic activity in the U.S. increases. 2- This leads to higher U.S. interest rates. 3- This leads to stronger U.S. dollar. 4- This is bad for gold. 5- Party over.
If life itself was only as easy!
Try this scenario:
1- Increased economic activity only accelerates the shrinking supply of many commodities. 2- Higher interest rates lead to lower bond prices. 3- This in-turn leads to higher mortgage rates. 4- This leads to a domino effect among the many Americans who have been robbing Peter to Pay Paul via cheap credit. 5- Party only begins for gold as an alternative to U.S dollar, as many realize the dollar is not worth the paper it’s printed on.
Since bottoming in 2001, gold has moved up in stages, all of which had sharp sell-offs within them. These sell-offs have merely washed out the excessive optimism at the time. This one shouldn’t be any different. The record number of speculative bets in the futures market was an accident waiting to happen. Keep in mind the last wash out was down to the $390 area. I don’t think we’ll come close to that this time around.
Don’t be surprised to see gold rebound as the week and month progresses and the $450 area hit before summer. I won’t.
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