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Technology Stocks : PairGain Technologies

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To: margin_man who wrote (20034)	2/4/1998 12:54:00 AM
From: Marc Trombella	of 36349

I really agree with somebody that mentioned earlier about PAIR taking off the last half of the year. At the COMNET conference last week, it was mentioned that Compaq, Microsoft and others in on the ADSL project would like to see the ADSL standard in place by the end of 98. Analysts claim there is too much optimism, and claim it will be more like two years. At any rate, PAIR needs the growth to sustain a higher PE trading ratio (I.E. Tellabs, LU). by clipping the .05 off 98 earnings of .85 hurt the upward momentum. that translates into a loss of growth of around 5.9%. Taking that into account the revised growth rate is around 20%. PAIR has a PE of about 23.8. Tellabs has a PE of around 29. I would like to see an upside revision in earnings for 98 or 99, to gain more confidence to trade in to PE range of around 30. PE of 30 is a price of $24 times 98 estimates. Market dictates PE trading ratios for each sector. Telecom equipment seems to be 20-29. PAIR falls about in the middle. Last summer PE trading was around 50. Translates into a price of $42.5 for PAIR X 98 estimates. We'll see maybe after first quarter earnings.

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