| To: kemble s. matter who wrote (148733) | 12/8/1999 9:22:00 PM | | From: Tom G | | | |
December 7, 1999 3:22 PM
Is Wall Street Dissing Dell?
By Monica Rivituso
DELL COMPUTER (DELL) jumped more than 1.5% this afternoon and was one of the market's volume leaders after CIBC World Markets upped its rating on stock to Buy from Hold and slapped on a $55 share-price target. In a lengthy note this morning, analyst James Berlino outlined his reasons. Bottom line? The market isn't giving the PC bellwether enough credit.
Berlino's $55 target assumes a multiple 2.2 times the rest of the market. Dell stock has traditionally traded between 1.1 times and 3.1 times the market, and Berlino contends it deserves a multiple somewhere in the middle of this range. To get there from the stock's current $44 price, the market will have to recognize just how strong a position Dell is in.
Take Dell's enterprise business, Berlino says. While the company's sales of big machines is experiencing strong growth, merely maintaining market share in the server, storage and services market would generate $10 billion to $12 billion in calendar 2000. That, he says, would push its revenue above $35 billion, which would represent 40% growth. Berlino upped his fiscal-year 2001 earnings estimate by six cents and his revenue forecast by $2 billion to reflect this opportunity.
What's more, Berlino says Dell's stock valuation should expand as investors begin to view it as a "fully integrated e-commerce company." Internet sales represented 43% of Dell's revenue in the third quarter, which worked out to $35 million a day. "Dell derives more business than any other e-tailer from the Web," Berlino notes. "More importantly, Dell's sales exhibit enviable profit growth."
Although investors have grown concerned about rising component costs and shortages, Berlino says these worries have been overblown. Rising prices for dynamic random access memory (DRAM) chips were of particular concern, having risen more than 150% during the third quarter after an earthquake in Taiwan. But Berlino reminds investors that this rise "nipped only a penny from Dell's results."
Microsoft's (MSFT) Windows 2000 is also expected to spur corporate demand for Dell PCs and Dell has positioned itself to benefit. "As investors realize that Dell will maintain its 40% top-line growth rate, the stock should return to the high end of its trading range, or $55 to $66 in calendar year 2000," the analyst says.
Of course, Y2K is still a looming cloud, and it's Dell's "most serious short-term challenge," according to Berlino. But he largely dismisses the threat, explaining that Y2K is a one-time event without many long-term implications.
"Regardless of whether the Y2K issues wreaks havoc or smoothly passes, we believe Dell will continue to win market share and invade new markets," he says. Another bump in the road has been a bug in Intel's (INTC) Pentium III chips. As Dell is an "Intel-only" PC vendor, if the situation becomes more severe than it is now (the bug only affects a small number of chips), then Dell may miss orders to do product shortages or extended testing procedures. But Berlino says at this time, the PIII bug isn't widespread. |
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| To: jhg_in_kc who wrote (148796) | 12/8/1999 10:54:00 PM | | From: Venkie | | | |
I believe we came too far too quick and momos get greedy..They will start taking profits and when the selling starts it will snowball..Most folks believe the techs are ready to correct and they will scramble for the door like wild...One drop of bad news and watch'em run..first one out gets the prize...Corrections are healthy and the<techs< are fat and bloated..If you can't see that then you are blinded from the hype.Hey ..I'm a hypster and even I can see that..The momos want us to get cozy while they sell their shs to us..I believe this and therefore I took some cash off the table like everyone else I know...If not I am still in the game...and will lock and load..
Good Luck |
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| To: grogger who wrote () | 12/9/1999 12:56:00 AM | | From: blake roberts | | | | |
here is the next stock to explode, INPR linux related. You know what that means. Corl has doubled in the last week, INPR will follow. They released news after the bell and is currrently trading up. Position yourself early for the ride up. You can thank me later. |
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| To: Chuzzlewit who wrote (148787) | 12/9/1999 4:15:00 AM | | From: Yamakita | | | |
Chuzz, would love to hear your comments on the following post if you have time (from the Qualcomm thread):
To: Voltaire who wrote (53162)
From: Kelly Kammeyer Wednesday, Dec 8 1999 10:01PM ET
Respond to Post # 53179 of 53194
<There is a very subtle glacier like movement taking place in the market and it is part of the new paradigm.>
Voltaire,
I discern three drivers of this movement, and they may not be obvious to the casual observer...
1) The current environment of rapid disintermediation, destruction, and reconstruction of businesses, demands that premium value be awarded to those businesses that "get it" at the expense of those that do not.
2) The expanding availability (Reach and Richness) of relevant information for investors, is dissolving much of the risk involved in buying great businesses. Since we know that the net present value (share price) of a stream of future cash flows (earnings) grows exponentially with declining discount rates (risks) applied to those cash flows, higher values for the best businesses are a fait accompli.
3) Similarly, the net present values of these companies are exponential with the growth rates of their cash flows, and therefore their PE ratio's logically ought to expand exponentially, and are continuing to do so.
In my view, the combination of these factors yield the oddly unfamiliar market you describe...
More and more investors and their vision for stocks no matter how few are coming at the market from a nonlinear and intuitive mode...
Kelly |
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