3Com Corporation (COMS) Message Board

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Technology Stocks : 3Com Corporation (COMS)

COMS 0.00130

-18.8%

Nov 7 11:47 AM EST

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To: Eric who wrote (10852)	11/27/1997 11:59:00 AM
From: craig crawford	Read Replies (3) of 45548

<< I'm curious if you are an engineer. My backround is in communications with heavy emphasis in RF and digital electronics. >> I barely know how to turn on my computer. I have a high school education and all of this technology stupifies me. I am a point and click guy, nothing else. I can't figure out why my AOL internet connection hasn't worked for the last day. (I am using my backup ISP GTE right now) << I think COMS will suprise on the upside. In the next 52 weeks it should break $80 per sh. >> Obviously this is where we differ. I don't think COMS can climb to over 80 in the next year. I do believe they can be higher than 35 though. We will have to see... << I've liked Coms because they have not butted heads with cisco and the two are very complementry. (of course that is changing as we speak!) >> CSCO is starting to butt heads with everybody... << Bay, Asecend and the other smaller networking stocks are going to face ever increasing competition and I expect only two or three survivors in a year. Who do you think will survive? >> I add COMS to your list of "smaller" networking stocks that are facing competition. Cabletron too. Ahhh, that reminds me. To help make my point that COMS could still go much lower just look at CS. Cabletron made a new multi-year low yesterday finishing at 23 1/2. CS has a trailing PE of 15. At 35 COMS trailing PE is 30. CS has more book value per share than COMS but trades 11-12 points cheaper. COMS has slighty more cash per share (only about 60 cents). CS has no debt and COMS has next to none so their pretty equal there. About the only category that COMS wins is P/S. COMS price/sales ratio is just a hair under 2 right now and CS is a hair over 3. But you have to understand that CS has around triple the profit margins, ROE, and ROA that COMS has so that's to be expected. I will be happy to make comparisons between COMS and CS using forward looking estimates but there would have to be some agreement on estimates for both since they have both come down. At 35 If COMS earns $2.20 this year it is trading at 15.9 times earnings. If CS earns $1.58 they are trading at a PE of 14.9. If COMS earns $2.80 next year they are currently trading at 12.5 times forward earnings. If CS earns $1.95 next year they will be trading at a multiple of 12.0 The problem is estimates for COMS are coming down so fast that $2.20 doesn't seem acheivable. If COMS can only make $2/share then they will be trading at a PE of 17.5. Once again though, some analysts are lowering the earnings to the $1.70-1.75 range for this year. At $1.75 COMS is trading at 20 times earnings. There are even some fiscal '98 estimates in the $1.40 range. To make matters worse when a company runs into trouble and is mired in a steep decline it rarely stops at "fair value". Usually the street discounts the stock further due to uncertainty and just plain panic/tax loss selling. So even if COMS is "fairly" valued at 35 it will probably trade closer to 30. Of course I believe that COMS might be fairly valued in the mid to high 20's so I expect that it could swing to the low 20's. Just one man's opinion. Now let's all go eat some turkey...

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