Cowen:BUY, tgt $45
DELL (Buy, $28) Top Line Gains Still Decelerating; Downgrade To Buy
. DELL H2 top line at risk, pulling down full year growth from 30% to 27% although favorable component pricing and mix should cushion any EPS impact.
. Running below plan in Europe and small biz. Notebook and Enterprise, while strong (+45- 50%E), also experiencing relative softness in Europe and small co segments.
. Mgmt has not yet provided any guidance re F02 (C01): preliminarily, lowered Q4:01 exit rate, we are using revenue growth of 24-25% to $39.9B vs. previous +30%E to $42.7B.
. Growth drivers remain unchanged: enterprise (Internet infrastructure, storage); notebooks (wireless); attached srvcs; storage momentum not quite there yet. Lowering EPS ests: F01 from $0.94 to $0.93; F02 from $1.27 to $1.15; FO3 from $1.65 to $1.45.
. Although we maintain our positive fundamental stance, reducing our rating to Buy to reflect our concern re continuing reduz in momentum; revised PT of $45 (35X C01, 31X C02 EPS).
CPQ (Buy, $29), HWP (Strong Buy, $96), AAPL (Buy, $24) - DELL statements yesterday will further accentuate pre existing concerns on stocks with PC exposure and European exposure (AAPL, already preannounced; both CPQ (2) and HWP (1) have nominally larger European revenue dependence, at 32%, than DELL at 19%) but we are maintaining estimates and ratings.
PHG (NR, $42), SSNLF (NR, $180), SHCAY (Buy, $151), Picvue (2333 TT, NR, NTD30), Wintek(2384 TT, NR, NTD83), KYO (NR, $158) - DELL sees lots of LCD capacity coming on in Q1; also has seen accelerated decline in DRAM pricing (Vanderslice, vice chairman, says had expected 64meg module prices in the $70-80 range, but now $50-60 (see MU story below).
SCI (Strong Buy, $37), JBL (Buy, $52) - ECMs with greatest exposure to DELL: SCI (approx 10% of revs; motherboards, other pdt lines); JBL (approx 16%; laptops). Shortfall differential represents an immaterial portion of total revs for both cos; would be buyers on weakness. |
