Banc of America Securities Issues Comments on QCOM, AMZN,
EGOV, CNXT and CNX
By: Banc of America Securities
9/20/00 7:00:14 AM
Morning Viewpoints:
Visit the CNET Brokerage Center for daily reports from the top Wall Street analysts.
QUALCOMM, INC. (QCOM)
BUY
? Stock has been strong:
? Bad news has worked through stock.
? Speculation that China may go CDMA--we believe it will, but so far is not big.
? Latin America may go CDMA.
? Korea recovering.
AMAZON.COM, INC.* (AMZN)
MARKET PERFORMER
Notes and Analysis from the Amazon Analyst Meeting
? There was no change in guidance or details on the current tone of
business. Having said that, we remain comfortable with our current
quarter estimates calling for sales of $595 million and a loss per share
of ($0.32) pro-forma, which appear to be conservative relative to the
second quarter results.
? We believe the following represent important data points that were
new to us including the following:
? Management suggested that they plan to grow at 50% CAGR over
the next ten years. This is the first time we have heard management
talk about how quickly they think they can grow the top line.
Management presented a slide with a long term operating margin goal
of more than 10% with a 25% gross margin, high single digit
fulfillment costs and low single digit marketing costs.
? Consumer electronics was the number two category behind books
in the month of September, suggesting improved traction in that
category. As it has gained share in the video business, Amazon’s
Marketing and Development Funds (MDF) have risen to 4% of sales
thus far in calendar 2000. MDF is likely to be a key contributor to the
long-term profitability in all categories.
? As of the second quarter, approximately 18% of all active 12-month
buyers made a purchase from Amazon in non-media categories
during the past 12 months, up from 4% during the trailing four quarters ending in December of 1999,
suggesting improvements in cross-merchandising. The increase in AOV in the most recent quarter
supports this data point. Management will continue to focus on driving up shipping margins with a
long-term goal that may be as high as the overall reported gross margin (i.e., 20 to 25%).
NATIONAL INFO. CONSORT., INC.* (EGOV)
MARKET PERFORMER
Downgrade to Market Performer on Second Half Shortfall
? We are downgrading National Information Consortium (NIC) from Buy to Market Performer and
suspending our price target.
? The company announced that it will not meet third quarter revenue and earnings expectations, and
also provided material downward guidance through 2001.
? We have reduced our 2000 revenue and EPS estimates from $87.6 million and ($0.60) to $77.4
million and $(0.80). For 2001, these estimates came down from $145.1 million and ($0.51) to $105.2
million and $(0.56).
? While we have cautioned investors about the performance at NIC Commerce following our customer
check calls, we were caught off-guard by the weakness at NIC Technologies (SDR).
ELOQUENT, INC.* (ELOQ)
MARKET PERFORMER
ELOQ: Pre-Announces 3Q00 Shortfall; Downgrade to Market Performer from Buy
? After the close today, Eloquent pre-announced that 3Q00 revenues would come in below Street
expectations.
? We are lowering our rating to Market Performer from Buy.
? We are further reducing our 2000 and 2001 revenue and EPS estimates.
EXAR CORPORATION* (EXAR)
STRONG BUY
Highlights from the BAS 30 th Annual Investment Conference – Raising Estimates
? Yesterday afternoon Exar’s management outlined an impressive strategic product roadmap in
broadband networking.
? In our opinion, the company is tracking towards faster than projected attainment of 62% gross
margin levels, and that gross margins are positioned to expand into the foreseeable future.
? We believe Exar’s largest customer Cisco continues to ramp as expected towards becoming a
greater than 10% customer by the fourth quarter.
VIRATA CORPORATION* (VRTA)
STRONG BUY
Highlights from BAS 30th Annual Investor Conference - Raising Estimates
? Yesterday, Virata echoed positive growth and market share capture in keeping with their recent
upside pre-announcement for the September quarter.
? Management reiterated that it would deliver September quarter revenue of at least $41.5 million, or
up more than 50% sequentially and $3.5 million above our $38 million estimate.
? Consequently, we are raising our September quarter revenue forecast to $42 million, and our EPS
estimate $0.01 to $0.08 from $0.07 previously.
CAMBREX CORPORATION(CBM)
STRONG BUY
? We are reiterating our Strong Buy on Cambrex with a target price in the wake of our EPS cuts on
the company’s plans to upgrade to upgrade its portfolio.
? It plans to beef up its high-growth biotech area with an acquisition.
? The climate for acquisitions in API’s is getting better as asking prices come down.
CAREMARK RX, INC.* (CMX)
BUY
Highlights from 30 th Annual BAS Investment Conference; Raising Price Target to $13
? Today, at the 30th Annual BAS Investment Conference, Caremark Rx gave an upbeat presentation
in which it reiterated positive trends in both of the company’s core businesses - Pharmacy Benefit
Management (PBM) and Caremark Therapeutic Services (CTS, a specialty pharmaceutical
distribution operation).
? Most significantly, the company disclosed that it has booked $600 million in new business to
commence January 1st, 2000, exceeding our previous expectation of $500 million.
CONEXANT SYSTEMS, INC.* (CNXT)
STRONG BUY
Highlights from the BAS 30 th
Annual Investment Conference
? Yesterday at the BAS Investor Conference Conexant again outlined the details of its network
access spin out scheduled for January of 2001.
? Historically back end loaded September quarter PC demand is reportedly ramping solidly as
expected. Management is maintaining its guidance for flat wireless growth in the current quarter, and
5%-10% next, as Korean inventory levels appear on pace to burn off in early Q4.
? We believe the spin off creates an enormous buying opportunity for investors given our broadband
semiconductor coverage universe mean 2000 price to sales multiple of around 30 times, suggesting
the spinout alone could achieve a valuation in excess of $15 billion.
Banc of America Securities' William C. Marks has lowered rating for TRAMMELL CROW COMPANY
(TCC) to BUY from STRONG BUY.
* We are changing our rating on shares of Trammell Crow to Buy from Strong Buy, primarily due to
valuation.
* Currently, Trammell Crow is trading at an estimated 2000 enterprise value/EBITDA (included in this
valuation is at least $231 million of owned real estate) of 5.2x, which is somewhat higher than the
property services sectors average of 3.7x. The companys 2000 P/E multiple is 9.0x, compared with
the industry average of 8.5x. For the year, the companys stock has appreciated nearly 32%, 26%
since our August 10, 2000 note.
* Despite the rating change, our outlook for the company remains unchanged and we maintain our
2000 and 2001 EPS estimates of $1.70 and $1.95, respectively.
This report is for information purposes only and is based on information available to the public from
sources believed to be reliable, but no representation is made that it is accurate or complete, and no
information herein should be relied upon as such. Opinions and projections found in this report reflect
our opinion as of the report date and are subject to change without notice. This report is neither
intended nor should be considered as an offer to sell, or solicitation or basis for any contract, for the
purchase of, any security, loan or other financial product. Banc of America Securities LLC, its
affiliates, Bank of America Corporation and their respective directors, officers and associates, from
time to time may maintain a long or short position in, act as a market maker for, or purchase or sell a
position in, securities, loans or other financial products mentioned herein, or of the entities referred to
herein, or related investment securities or products. Banc of America Securities LLC or its affiliates
may have acted as manager or co-manager for a public offering of securities of companies mentioned
herein. Banc of America Securities LLC or its affiliates may be performing, have performed or seek to
perform investment banking, advisory, banking or other services for any company mentioned herein.
Certain securities in this report may not have been registered under the Securities Act of 1933 as
amended (the "Securities Act") and may not be offered or sold except in a transaction pursuant to
SEC Rule 144A, Regulation S or otherwise exempt from or not subject to the registration
requirements of the Securities Act. Past performance of securities, loans or other financial
instruments is not indicative of future performance. This report may not be circulated or reproduced
without prior written permission from Banc of America Securities LLC. Banc of America Securities
LLC is not responsible for typographical errors herein. Further information on any security mentioned
herein may be available upon request. Banc of America Securities LLC is a subsidiary of Bank of
America Corporation and is a member of NYSE, NASD and SIPC. © Copyright 2000 Banc of
America Securities LLC
Email this story to a friend
Click for printer-friendly format
Related News
Technology - News.com
Natl Info Consor Cut to
'Market - Bloomberg
Amazon.com Inc.
Reiterated - Bloomberg
National Info Consortium -
Bloomberg
Conexant Systems
Reiterated - Bloomberg
National Info Cut to
'Market - Bloomberg
Natl Info Consortium Cut -
Bloomberg
Quattrone's CSFB Tech -
Bloomberg
Investor Dispatch:
HTML edition
Investor Dispatch
News.com Dispatch
All Newsletters |
