Ascend Communications (ASND) Message Board

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Technology Stocks : Ascend Communications (ASND)

ASND 208.52

-0.3%

12:03 PM EST

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To: Karl Radke who wrote (27882)	12/14/1997 5:28:00 PM
From: Larry J.	Read Replies (2) of 61433

<<<Why buy a stock when its 1997 projected EPS is to be 1.05 and fiscal 1998 is to be 1.15.>>> 2 Reasons: 1. The 1998 earnings estimates are too low. Once this becomes apparent to the street, earnings revisions and upgrades will follow en masse (analyst herd mentality). Furthermore, while your numbers quoted are the First Call numbers cited, Zacks Investment survey has them @ 1.07 '97 and 1.20 '98. (We also just saw Furman Selz come out w $1.25 on 12/3). The growth rate quoted (1st Call) is 35%. This is simply inconsistent with 10% growth in earnings. One of them is wrong, and I argue that its the consensus estimate not the growth rate. (ASND mngt. itself has forecasted high single digit quarterly sequential growth the first half followed by 10% in the second, equating to 38% or so). Look for '98 estimates to be revised upwards to 1.45 following ASND's earnings release on Jan.20. Even at the same PE ASND trades at today (23.5 x 1.15) the share price will be $34. A bit further out, ASND will command a higher PE following a few consistent quarters. A PE of 26 - 28 is still fairly conservative and nets a share price of $38 - $40. 2. A buyout is still a very real possibility. ASND is the bonified market leader in several of the markets they serve. Several of the big boys that have deep pockets (LU, CPQ, IBM, NT, INTC) have stated again and again that they want to either expand into or vastly enhance there networking product offerings in a big way. ASND would represent a hell of a beachhead. An aquisition price of $40 would be the absolute minimum that Ejabat and co. would let ASND go for. All my opinion of course. Larry

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