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Technology Stocks : Lucent Technologies (LU)
LU 2.8200.0%Nov 7 3:59 PM EST
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To: MRE who wrote ()1/11/2000 10:29:00 AM
From: John Malloy  Read Replies (1) of 21876
 
Here's a revised estimate what Lucent is worth after accounting for the earnings warning debacle. My model has Lucent's price rising to $77 in 6 months, to $101 in one year, and to $165 in two years. An investor who insists on a 12% minimum after-tax return could afford to pay as much as $69 if he planned to hold Lucent 6 months, $83 if he planned to hold Lucent one year, and $114 if he planned to hold Lucent two years.

Lucent's price/book ratio dropped from 16 before the warning to 11.8 today. The P/B ratio should gradually recover, but not to the former ratio. My model is based on the P/B ratio running slightly above 12 for the next two years. Growth in equity/share drops from the former 53 %/yr. to the high 40's, then recovers to about 51 %/yr.

John Malloy
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