Dialogic ready to soar, funds buying Message Board

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Technology Stocks : Dialogic ready to soar, funds buying

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To: Jay M. Harris who wrote (395)	8/6/1997 8:29:00 PM
From: Jay M. Harris	of 674

The board is very quiet for a $37 stock price. This stock is up 117% in a little over 3 months. This is volatility at its best. I can tell there are a lot of DLGC veterans on the board not making a big deal out of a little appreciation. This is good. We could very easily give it back. However, I don't believe we will. DLGC is cheap! I cut the subsequent valuation work from my analysis of the q1 miss. . " am reducing cal 97 eps from $1.56 to $1.35. This requires a cut in cal 98 to $1.75 and a reduction in the P/E to 25X yielding a new 12 month target of $43 or 25X cal 98 eps of $1.75" While my cal 97 eps estimate is clearly aggresive, my cal 98 is not. One way to look at this is if 1997 #'s are not achieved, then the $1.75 eps # for 1998 will represent a larger growth rate YOY. This could very easily expand the P/E ratio because DLGC is the CTI hardware leader for which PM's will be willing to pay a premium. Put another way, $37 price/ $1.75 cal 1998 eps = a 21X p/e on forward EPS. However, $1.75 cal 98 eps devided by lets say $1.30 cal 97 eps = a 34% YOY eps growth rate. Now if the $1.30 97 & the $1.75 98 numbers are achieved (I think they will) then applying a P/E ratio of 30X (for 34% YOY eps growth) would yield a new 12 month price target of $52. for appreciation potential of 40% above the current price of $37. Well why don't I up my 12 month target you might ask? Answer: If DLGC lands the UUneT aka Worldcom fax over IP contract over the next several months I will. Also, I mentioned in a prior post not to underestimate the good things going on within DLGC from an expense as a % of revenue perspective. Tom Amato is very real and is beginning to be felt internally. R&D expense slowed last quarter and there is plently of fat to attack in this companies SG&A line with all of the indirect channels as a % of sales. SG&A will be on ultra slim fast and the P/E will reflect this over the next 12 months. So don't worry about give back and be happy.. This market and DLGC has legs. Buy the way :) I upped my 18 month target on the DOW to $10,000. This is because the federal deficit is currently running at a $31 billion annual run and Ed Hyman (economist @ ISI Intl feels that the new capital gains legislation should put the federal Government into a surplus of $23 billion by the end of fiscal 1998 (Oct 98). This would cause the 30 year T-bond to rally to 5.4% and cause the P/E on the DOW to expand to hit my target of DOW 10,000 for a 20% appreciation from current levels. Remember, we are in the golden age of the stock market and the US is leading the charge. Productivity growth; low inflation (2%); global market(trade agreements and end of the cold war; information revolution and the internet as the next mass medium;Global digital wireless(Iridium); ageing of the boomers (76 mil) saving for retirement. Hope this post helps... Happy Investing, Jay

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