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Technology Stocks : Computer Associates
CA 24.960.0%Dec 30 4:00 PM EST
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To: Edwarda who wrote (4160)4/21/2000 9:06:00 PM
From: Danny Boy  Read Replies (2) of 5232
 
May I humbly offer my opinion on CA's correct valuation?
The current market multiple for the group is 57. CA is 14. CA is one of the top 3 software firms in the world with 6.3B in revenue. '98 growth was 11% (Asia crisis) '99 growth was 20% (Y2K). No telling the effect of Y2K until this year is out. That equals uncertainty which equals sell the stock. Fine. The stock is trading below its 1997 high. Find another major software leader including MSFT who is trading below their '97 high. CA has accelerating growth. But this requires confirmation in coming quarters. If you believe the growth in revenue is a trend then you must consider the market multiple which gives you a price of 57x 3.20 or 182 well ahead of Crystal's 160. The 57 would be a premium to growth but is that so unusual? A nominal PE of 35 would give you a price of 112 and against next years 3.86 (which I consider light) 135. If the stock were to climb to such lofty levels in the metric of some on this thread then rumors of a split would be in order creating further speculation. Crystal's 160 seems quite reasonable and even a little shy of potential 12 month targets. But it is a nice round figure that comes in between high hopes and normal expectations. Isn't that what Wall Street is supposed to do?

My advice to the bears is to short like hell on the way down or up and look for those 20 to 30 percent returns. I'm only looking for a 4 bagger.

Come and get your love,
DGB
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