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Non-Tech : CompUSA (CPU)
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To: Yong Kim who wrote (48)12/31/1996 3:05:00 PM
From: Cynic 2005   of 3187
 
YK, a 7% growth is not good enough. The fact that analyst expectations are lower doesn't make the story better for CPU. PC sales are expected to grow at 15% or better for all of 1996. Computer city, Circuit City, Best Buy have posted declines in PC sales. CPU, if they are gaining market share from the others, MUST grow better that 17% overall and atleast 10% on same store basis. Even at these optimistic growth rates, if this lofty PE for a retail store chain (regardless of other business segments) has to be justified, the gross margins have to be better than the last year's, IMHO. Do you see that happening (improved gross margins) in the current competitive environment? I think the same store sales for CPU will grow at 5% or less which will set a lot of PC stocks for a big fall on January 2nd. And, I am betting on this scenario. I own puts on CPU!
Good luck!
-Mohan
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