Here it is:
Down, down, down go the price targets on techs
RIM gets the chop for 'unjustified' premium to peers
Scott Adams
Financial Post
Technology stock targets are on a slippery slope and the bottom still is not in sight.
Analysts continue to push down their target prices on the techs. Andrew Lee of TD Securities yesterday cut his Research In Motion Ltd. (RIM/TSE) target to $48 from $70, saying it is trading at more than double the valuations of its peers. He also cut his targets on other wireless tech plays.
RIM fell $3 to $59 in Toronto yesterday. Mr. Lee already had a lower target on the hand-held computer device maker than most other analysts.
"We reiterate our 'reduce' [recommendation] on RIM and believe that the large valuation premium over its peer group is not justified," Mr. Lee wrote in a research note. "We believe that the stock price reflects an assumption that current revenue estimates for RIM are extremely conservative."
In making their forecasts, most analysts have not factored in revenue from new RIM customers, such at BT Cellnet and America Online, because they are not sure how much in sales these new customers can account for or when material sales will come.
RIM is trading at a price-to-sales multiple of 10.2 times calendar 2001 revenue of US$344, Mr. Lee wrote. RIM would need to achieve revenue of over US$725-million to trade in line with the average peer group multiple of 4.8 times, he added. Peers include Palm Inc. (4.6 times), Handspring Inc. (7.3 times) and Novatel Wireless Inc. (3.4 times).
Mr. Lee also chopped his target on another RIM peer, modem maker Sierra Wireless Inc., to $89 to $126, though he believes the stock is "oversold" now. Its price-to-sales multiple for calendar 2001 is 3.8.
He cut his target on COM DEV International Ltd., a wireless and satellite equipment maker, to $19 from $28.
COM DEV stock (CDV/TSE) fell 80¢ to $7.40 and has fallen hard -- dropping 47.1% in February --since customer Nortel Networks Corp. issued its earnings warning.
Elsewhere, Todd Coupland, analyst at CIBC World Markets, cut his target on GSI Lumonics Inc. (LSI/TSE, GSLI/NASDAQ) to US$16 from US$55 and his recommendation to "buy from "strong buy." GSI reported a disappointing fourth quarter and Mr. Coupland reined in his estimates for 2001. His operating earnings forecast fell to US84¢ a share, from US$1.10 a share. Despite the downgrade, the stock rose 14¢ to $13.90 in Toronto yesterday and 7/32 to US$93/16 on the Nasdaq.
The Nasdaq composite index continues to sink, losing 2.5% yesterday to 2151.83, its lowest point in more than two years. And investors continue to flee the sector. "People are very risk averse right now," said Ian Nakamoto, portfolio manager with Bonham & Co. "People just want out regardless of prices."
sadams@nationalpost.com |
