HS
re: This company gets an upgrade?? Yeah right...
funny that you said that :-))
Regards
-Albert
Intel, Compaq, Others Forecasts Are Too Rosy, Investors Say
2002-01-31 12:21 (New York)
Intel, Compaq, Others Forecasts Are Too Rosy, Investors Say
San Francisco, Jan. 31 (Bloomberg) -- Wall Street analysts'
forecasts that Intel Corp., Compaq Computer Corp. and others'
profits will soon recover from the recession, then soar in the
second half of this year, are too optimistic, investors said.
Intel, Compaq, Microsoft Corp. and 80 other computer-industry
companies in the Standard & Poor's 500 Index will see their
combined per-share profits more than double in the third quarter,
then jump 90 percent in the fourth quarter, according to average
forecasts of analysts surveyed by Thomson Financial/First Call.
Some shareholders disagree.
Analysts are too optimistic and actual results for the period
will likely fall short of those targets, investors said. Since the
recession began in March, forecasts for periods more than three
months away have proven to be too high and been slashed as those
periods approached.
``It's like the Annie story: `The sun will come out
tomorrow.' They've been singing that for three quarters,'' said
Christian Koch, an computer-industry analyst with Trusco
Investment Management, which manages more than $50 billion.
Sell-Side
The combined per-share profits of 83 computer-industry
companies in the Standard & Poor's 500 Index are expected to jump
130 percent in the third quarter from a year earlier, according
First Call, which tracks earnings forecasts. Analysts expects
earnings to climb 90 percent in the fourth quarter, according to
First Call.
Forecasts made by sell-side analysts when the economy is
slowing or in a recession are generally too high, and the second
half of the year will be no exception, said Joe Cooper, a research
manager with First Call.
``You will probably see those forecasts at least cut in half
as the second half approaches,'' Cooper said.
Computer-industry stocks may fall because the group's shares
are already expensive when judged against current earnings
forecasts, some investors said.
``We don't want to make any major assumptions without some
real evidence,'' said Ray Chan, an analyst with Franklin Templeton
Investments, which manages about $250 billion. ``Any kind of
disappointment in the speed of recovery does leave some earnings
risk.''
High Multiples
Sun Microsystems Inc., whose server computers run corporate
networks and Web sites, yesterday rose 23 cents to $10.87. That's
about 155 times the 7-cent a share First Call forecast for
calendar 2002 profit. For the six months ending in December,
forecasts call for Sun to report a profit of 8 cents, compared
with a year-earlier loss of 8 cents.
Advanced Micro Devices, the No. 2 chipmaker after Intel, fell
13 cents to $15.76. That's about 197 times the 8 cents that
analysts expect the company to report this year. Forecasts call
for second-half earnings of 16 cents, compared with a year-earlier
loss of 33 cents.
With shares trading at such a high multiple to forecast
profits, it's tough to find stocks with worth investing in, said
Todd Ahlsten, research director at Parnassus Investments.
``We're having a lot of problems finding undervalued
companies,'' said Ahlsten, who's keeping about 40 percent of his
firm's $500 million portfolio in cash. ``You need a margin of
safety to buy stocks.''
--Jim Finkle in the San Francisco newsroom (415) 912-2996 or at
jfinkle@bloomberg.net. Editor: Todd.
Story illustration: To graph changes in the Nasdaq Composite
Index, see {CCMP <Index> GP <GO>}.
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