Mang, this is how I see the math:
>>SG Cowen analyst Chris Stix told clients that, based on a likely post-pricing valuation of $36 to $42 for Palm, representing a valuation of $56 to $62 for 3Com, he was raising his recommendation on 3Com to "buy" from "neutral" and setting a $60 12-month price target for the company's shares<<
His math looks screwy to me.
If Palm hits $42 then COMS's outstanding Palm shares have a value of $22+ billion...530 shares x $42/share...which given COMS 342m shares outstanding would make the Palm part of COMS worth $65. (This is so much higher than we were all figuring because they're selling off only about 7%-8% of the Palm shares, instead of 20%). Now add in
$6/share pure cash,
$5 for investments (how much are they worth, exactly?),
maybe another $1/share for Palm proceeds (can't remember exactly how much passes through to COMS)
Now you've got $77, and that's assuming that COMS-PALM is worth ZERO. Instead, let's conservatively give COMS a P/S of 1 (for a P/E of 10), that adds another $15 to the stock. So we're at $92.
If we hit the low number on his range ($36 per Palm share), then the grand total drops to $85/share.
Maybe I have the numbers wrong. Anyone?
If we assume that Palm won't budge from the IPO price, the above conservative valuation would give COMS a value of $51 and change. About where we are now. IMO current pricing does not either a) take into account any potential upside or b) properly value COMS minus PALM - a P/S of 1 (or P/E of 10) are too conservative.
I see $70+ as very likely, and $100 is certainly within the realm of the possible.
Andre |
