A wide range of stock prices are possible. The H&S patterns
are pretty distinct. Believe it or not, most TA books
say the H&S formation is one of the most reliable... but
beware... certain volume characteristics must accompany
for accurate interpretation of the possible outcomes.
I look at it this way. PEG. EPS will grow by at least 40%
next year which means EPS $2.55 this year, $3.57 next year.
If you value growth... and the market loves growth... Dell
then should easily have trailing 12 month PE of 40. This
would give Dell a current value of $102/shr based on the $2.55
year end earnings.
Many bears contend that next years earnings growth will stink
but offer no insight as to what they think it will be or exactly
what would have to happen in terms of volumes, margins, product
mix and operating costs. Bears need to get out their spreadsheets
and get busy.
I contend that Dell will likely beat 40% Y/Y earnings growth
next year... 45% would not be terribly difficult which yields
EPS of $3.70/shr.
To be sure, investors could just as easily decide that the business
has become too risky and bestow a PE of 20 on the stock. Now
it becomes $50/shr.
So there's you range today, price 50-100, PE 20-40.
My research indicates Dell will continue to surprise to the
upside leaving analysts scratching their heads in amazement
as to how Dell is able to maintain healthy margins and solid
revenue growth with desktop prices coming down. Desktop
prices coming DOWN... gee does'nt this sound a lot like 1991,
1992, 1993, 1994, 1995, 1996...
Dell has told everyone what they are doing, why and how... a
lot of folks don't analyze, read, comprehend or just plain get
it. This is why I find it AMAZING that bears short the stock
primarily because Dell forgoing low margin systems favoring higher margin opportunities that conservatively still represent over
85% of the entire PC universe.
All Dell is doing in regard to the low end market is keeping
a close eye on it. If growth continues at it's current rate
and this becomes a powerehouse catagory representing as much as
25% of all systems sold... I would expect them to enter.
Sorry Paul, I know I did'nt answer your question...
MEATHEAD |
