Today's Comments from AG Edwards
By: AG Edwards
8/25/00
UPGRADE
--> ADC Telecom (ADCT) -- Upgraded to Buy from Accumulate. Price objective is $51. Analyst is
David Heger, whose comments follow:
"Following the release of third quarter earnings last week, we changed our rating on ADC due to
valuation concerns. Although we increased our revenue and net income projections through fiscal
2001, our 2001 EPS estimate remained at $0.74 due to the additional shares issued for recent
acquisitions. As a result, our valuation remained at $51, which represents a multiple of 69X our 2001
estimate. In light of the strong earnings results reported by the company, shares moved much closer
to our $51 valuation. Since that time, however, ADC shares have declined by over 20%, with no
change in fundamental outlook. If anything, we suspect that the company may report additional
upside to our current estimates. We will also be watching closely for a pending management
decision regarding one million square feet of additional manufacturing capacity. We feel that if the
company moves forward with adding this capacity, it sends a strong signal that management expects
even higher demand than reflected in current guidance. Even without this decision, we feel that the
share price now offers enough potential appreciation to our current price objective to return to more
actively purchasing shares. As a result, we are upgrading to a buy/aggressive rating from an
accumulate/aggressive rating." |
