Away myself for a day and look what happened! Looks like DELL was steadily shaking off the CPQ warning when the HWP comments set it back yet again.
FWIW, I see the new "floor" on DELL as being around 60, because that's all the current analyst earnings valuations and growth estimates will support. Assuming the general market holds up (or doesn't decline more than 5% through March/early April) and we don't get any more PC industry bombshells (are there any left?), I think DELL will remain in a trading range of 60 to 70 max until the next earnings report in May.
DELL seems to have done all they could to reassure the analyst community that they see no effect on DELL's earnings from either CPQ's inventory woes or a price war, nonetheless the market perception now seems to be that this does pose a threat to DELL's earnings that only the Q1 results will remove. As the highest priced PC manufacturer stock, DELL seems to be more affected right now than IBM, HWP, GTW, though that could change in a matter of days. My trading plan for DELL is to buy on any weakness near 60, sell at 66+, at least for the next month. Next big run up will not be until late May, unless some positive industry news comes out.
IMO, the best scenario for long term DELL holders is that the analysts will reduce their estimates for DELL's Q1 over the next month or so, giving DELL a better chance of beating them handily again. My estimate for Q1 is still 0.42 to 0.44, well above the analysts' mean, because I haven't seen anything to suggest that PC growth is going to slow down in 1988/1989.
David T. |
