Just got the latest report of ValueLine on LSI Logic. It shoud be noted that my experience with ValueLine has been that their reports are extremely conservative
Here it is:
TIMELINESS = 3
SAFETY = 3
2000-20002 Projections
High: price : $75
low: price: $50
LSI Logic will likely finish 1997 with a moderate gain over last year. Sales and earnings increased 9% and 57%, respectively, in the September period, owing to higher demand for video games and digital cameras. The comparison is exaggerated, however, since the year-ago figure had suffered a 55% decline. New orders are not high. The book-to-bill ratio was 1.0, which points to slim sales growth in December. Too, We're expecting higher costs - primarily R&D and SG&A-associated with the introduction of new products and low capacity utilization. These factors will probably produce poor profits this quarter.
The company should enjoy a stronger 1998, though. LSI has recently had many significant design wins in the communications and consumer sectors. We think this is a pretty good indicator of future orders, so we look for significantly higher shipments next year, particularly to high performance computing (Windows NT workstations), data storage, networking, and consumer markets. Sales of PlayStation are still very strong with no signs of letting up. Too, the company will contribute to Sony's DVD player, which should enjoy good growth next year.
Looking longer term, the company should benefit from high-growth areas, such as telecommunications. This segment has substantial long term potential for growth, especially for ATM, ethernet, frame relay, remote access and wireless applications. Computer markets: Demand for workstation, storage device, and server products continues to grow, primarily due to rapid expansion of internet, and consumer goods. In addition to its profitable association with Sony, LSI will likely forge relationships with other consumer businesses. Areas to which include set-top boxes, for which LSI has designed the first self-tuning single-chip Digital Broadcast Satellite receiver, and digital cameras, which may begin significant contributions to the top line as early as December 1998.
LSI stock has appeal to 2000-2002. We are optimistic about the company's prospects for the next 3 to 5 years. Near-term uncertainty exists, however. We expect the stock will merely track the averages in the next six to 12 months.
Anyway, above is ValueLine's take on the stock which in my humble opinion is very conservative.
Regards,
Addi Jamshidi |
