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AU Optronics Corp. Message Board

  • martino85251 martino85251 Mar 2, 2004 1:06 PM Flag

    Reality Check

    Question for board -

    Would there be a lot of buying if AUO were too decline to $17, $16, $15? Yes, of course, PE would be too low for fundamentals.

    Will AUO go below $15? No. Didn't think so.

    Does AUO have the potential to go to --
    $20 (10.7 PE; 0.26 PEG), $25 (13.4 PE; 0.33 PEG), $30 (16 PE; 0.40 PEG), $35 (18.7 PE; 0.47 PEG), $40 (21.4 PE; 0.53 PEG)?

    I think the answer is yes. So upside is arguably $40 and downside is maybe $15. Risk, reward ratio seems very favorable. Any thoughts?


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    • I agree about upside/downside risk and that's the main reason I bought the stock. What if the markets turn bad though? AUO won't be goin much higher if that occurs. I'd rather have as much cash as possible, to preserve my capital. If you're willing to take the time to make well informed decisions about the short term movements of a stock, you can have a good chance of riding the upsides and sitting on the sidelines otherwise. With that said, the risk/reward ratio is very nice w/ this stock.

      • 2 Replies to proplaydesigns23
      • You ask what will happen to AUO if "the market turns bad". I assume that you mean the stock market and not the market for LCD's (There is not much chance of the LCD market tanking iin the near future and someone watching closely could see it coming before any collapse there IMO). So let's talk about the stock market turning bad.

        If AUO reaches the expected earnings this year it is still selling only at about 10 times earnings. Even if the market goes bad, a PE of 10 plus a large dividend and a humongous growth rate should support the price or lead to further increases IMO. Yeah -- maybe the stock will stop going up like it has over the last week. Not every day is Christmas. Nevertheless, if you park your funds somewhere other than in a money market, you are likely to take a bigger hit if the market tanks than you would if the same funds were in AUO.

        That being said, there is, of course, the risk with AUO that something happens in Taiwan which causes a disaster for AUO. Taiwan has been at China's doorstep and in danger for the last 56 years, however, and so far nothing has happened. I am willing to take that risk.

        Finally, we should look at the likelihood that the market will turn bad. Obviously, it is a real possibility, but IMO not a high probability. This is an election year -- taxes were cut, the Fed is not tightening, and there are no inflationary pressures to speak of. If, god forbid, there is another serious terrorist attack, it would knock the market for a loop, but I doubt that the impact would hit the market in all sectors evenly. Airlines, hotels and travel related items would be the worst hit IMO. On the other hand, such an attack might actually stimulate sales of large screen TV's since people would want to stay home more to avoid perceived dangers.

        I still think that the play for AUO is to buy and hold for now. There is just too much likelihood of continuing upside to risk following the buy/sell game and finding oneself missing a major increase.

      • Kilroy's first goal in investing was 'Capital Preservation.' You are right on.

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