Shares in storage firms hit by valuation concerns
By Bloomberg News
October 26, 2000, 2:00 p.m. PT
update HOPKINTON, Mass.--Shares of data storage leader EMC and those of its rivals fell amid concern that storage stocks have gained too much given their prospects, analysts said.
EMC fell $4, or 4.4 percent, to close at $86, after touching $80.50 early in the day. Rival Network Appliance fell $5.44, or 4.5 percent, to $116.81. Brocade Communications Systems, a storage-switch maker, fell $25, or 10 percent, to $216.
The storage markets that Hopkinton, Mass.-based EMC and others are targeting will swell to $78 billion in 2003, from $44 billion this year, as more companies do business on the Internet and generate huge amounts of data, according to EMC. That prospect has led investors to boost the stock prices of many storage-related companies, said Dain Rauscher Wessels analyst Thomas Coler.
"All these stocks have had massive runs, and in this climate, investors are concerned about their valuation," Coler said.
EMC shares have climbed 51 percent in 2000. The stock trades at about 107 times estimated earnings for this year, compared with an average price-to-earnings ratio of 26 for companies in the Standard & Poor's 500 Index. Brocade shares, which have more than doubled this year, trade at about 390 times expected earnings.
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These high valuation stocks need to come down to more realistic levels, JMHO. |
