Well, to clarify, the stock drop 70% I'm talking about from Feb93
to Jul93. They lost money that year mainly due to notebooks. 70% stock drops happen when you loose money... that is, negative EPS for the year.
So sure, anything can happen but I think the worst thing we
could see from Dell in the next several quarters is slower
earnings growth but no qtr/qtr decreases in EPS. That's
positive growth.
The concern now is lofty PE's. Should Dell's growth slow to
below 40% yr/yr sooner than expected, we absolutely
could see PE ratios in the 15 to 20 range again. I say,
sooner than expected because it is expected that growth will
slow to 20-25% in by 2000.
My downside case analysis shows that if in 1998, Dell exceutes
poorly, ASP declines accelerate faster than anticaped,
CPQ, HWP, IBM's gangup on Dell slows their growth, sub-Zero and
internet appliances displace more PC sales than expected,
then I see earnings coming in ~$3.35/shr, a 30% yr/yr growth
rate. A punishing PE of 15 puts the stock at $50/shr.
Negative growth or a massive one time stumble like the notebook
situation is not factored into my downside analysis. If that
happens, the stock is toast.
MEATHEAD |
