PBB: I am sure you don't need reminding, but this thread was going to meet when COMPAQ reached $50 - the so-called 50Paq meeting. In a November 1998 competition I had predicted the date for $50 as 4th February, 1999 the rest of the thread chose dates between mid April and June, 1999. As the price went through $50 intraday (but not closing) in January, last, the thread cancelled the $50Paq meeting and started to talk about a $70Paq in the same time frame. The rest, as they say, is history.
The thread is a bad indicator. When the share price goes up 1/2 there are calls for 10.
I think we should be very cautious about the share price if and when it approaches $30.
I tend to agree with the very perspicacious gnu222 who posted this on the Yahoo CPQ Club "broad":
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m 102 & brian: COMPAQ's weakness is ROI - the paltry profits it has produced on more than $70 billion dollars revenues in the last two years. As I read brian's list, the profits angel kept whispering in my ear "yes, but what about me". If yk2, and hesitation in orders from those waiting for iPaq next quarter do not have significant impact, it looks like PC unit sales will be good in 4Q but revenues will be down, margins will be down. In the unlikely event that commercial PC's earn a profit in 4Q, it would be wiped out by the "operating expenses" which is what they intend to call the compensation paid to Alpha users. Servers, storage and services will need to be very good. I am very cautious about 4Q, it may well disappoint the market in the sense that any optimistic run up in the share price between now and then will be deflated by the actuality of the results. So one can concede that seasonal and sector optimism will run the share price up to $30 or even $35 on an intraday spike, while also believing that the share price will return to the $26-32 range after the 4Q results. I think the 1Q will also struggle to impress. The cost of change, of developing and launching new products will continue to be high, while new product lines will need time to build up volume and improve in their profitability. I think a strong upward momentum in profits will begin in the 2Q. WS may have already anticipated it in the share price, but if it has not, then I would see the share price moving from the $26-32 range in April strongly to $40+ in June and from a firm base of $40 in June/July marching on to $60+ by earnings in January 2001.
I think earnings of $2+ is attainable in 2000 but once the tide has turned and WS feels confident, it will award a higher forwrd p/e so that by the Fall of 2000 it will be taking into consideration even higher 2001 profits, as well.
The wildcard in terms of share price valuation will be the value of the CMGI holdings and the value of the Alta Vista holdings when it is foated in the Spring. Neither will contribute to "operating profits" although both will contribute to the asset side of the balanced sheet - assuming there is no collapse in the internet "bubble" by then. Looking a year or more ahead, it is possible that these assets will be converted to cash or be used in an acquisition and in either of those cases, they will begin to contribute to COMPAQ's bottom line.
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