TIP SHEET: Pittsburg Likes Developing Communications
By DWIGHT OESTRICHER
NEW YORK -- In the future Jeff Pittsburg envisions, consumers in the U.S. catch up to their brethren in international markets and use their cellular phones and personal computers for myriad duties. So he has his sight set on the stocks best prepared to take advantage of the coming digital age.
"More and more people will buy wireless phones in the coming year as roaming charges disappear and new features are added," said Pittsburg, head of Pittsburg Institutional Inc., an institutional research "boutique" that will trade in the names it covers "from time to time."
Growth in the wireless industry could pump AT&T Corp.'s (T) stock price to $65 a share in 12 months from the current low 50s, while Bell Atlantic Corp.'s (BEL) stock could reach $75 - compared with the current mid-60s range, he said. 3Com Inc.'s (COMS) wireless access and digital subscriber line operations could prove to be as big as the company's Palm Computing unit, which the company plans to spin off next year, Pittsburg said. Shares of the networking company, which were in the mid-$40 range recently, could rise to the $60 to $64 range in 12-to-18 months, said Pittsburg.
Sprint Corp. PCS (PCS), a leader in the wireless field, doesn't make the cut, Pittsburg said, because its price is very rich, having hit a 52-week high of 114 7/16 on Dec. 14.
Taking a look at the initial public offering market, Pittsburg said he thinks Airnet Communications Corp. (ANCC), could make great gains as its wireless business delivers more to the top line in the next two years, he added. Airnet's IPO of 5.5 million shares was priced at $14 each on Dec. 7 and rose to $45 that day. Pittsburg said the stock, which has been trading in the mid-to-high $20s range lately, could touch that high again within a year.
Pittsburg said he likes the DSL group because of the gains it will make as more businesses adopt the service. His favorite in the group is Northpoint Communications Group Inc. (NPNT), whose shares are "correcting" since falling off from a 52-week high of 48 3/4 set May 6. Capturing even more market share should enable Northpoint's stock to reach 48 next year, said Pittsburg. The stock, which hit a 52-week low of 17 5/8 Aug. 10, has been trading in the mid-to-high $20s range recently .
Shares of Alcatel ADS (ALA), another DSL stock, would be attractive if they fell into the mid-$30s again, said Pittsburg. The stock hit a 52-week high of 45 on Dec. 6.
Pittsburg said companies with satellite operations will also be big winners in the next two years as demand for wireless telephony, broadband video, voice and data, and other services increases. His favorites in the group are General Motors Corp. Class H (GMH) and Loral Space & Communications Ltd. (LOR).
Now that DirecTV, a unit of Hughes Electronic Corp., can offer local stations with satellite television service, the subscriber base should increase, Pittsburg said. In response, Class H shares of parent General Motors Corp. (GM) should reach about $120 a share in 12 months, from its current price in the low $90-range, he said.
As for Loral, it's in a rebuilding state and the shares are "dirt cheap," Pittsburg said, ahead of the profitability that should take off in two years. Within that time frame, shares of Loral should reach $50 a share, compared with its current high-teens level.
A pairing of defense and satellite operations should pay off for Lockheed Martin Corp. (LMT) and Boeing Corp. (BA) in the short term, Pittsburg said.
"I think we will see a lot more transmission via satellite of voice and data as cellular phone service expands into places where it's not available," Pittsburg said. "And defense budgets are going up in the world to a certain degree."
Families keeping in touch by passing photos over the Internet will prove to be a boon for Eastman Kodak Co. (EK), Pittsburg said. A healthy economy and the pace of new computers in homes will benefit sales of the company's digital cameras, which allow people to develop pictures on their computers and transmit them over the Internet.
Kodak's digital operations are undervalued by the market, said Pittsburg, who has a 12-month price target of $87 on Kodak shares, which have been in the low-$60 range lately.
-By Dwight Oestricher, Dow Jones Newswires; 201-938-5266
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