This is some of last week's upgrade comments from Alex Brown:
JABIL CIRCUIT, INC. (JBL) "STRONG BUY"
Looking Beyond Temporary Weakness--Expect News Of Current Customer
Recoveries--New Strategic Relationships With Upside Earnings
Potential--Maintaining Estimates For Now--Upgrading To "Strong Buy"-- Raising Price Target
HIGHLIGHTS:
-- We are upgrading our rating on shares of Jabil Circuit to "strong buy," with a price target of $54 (20x our CY99 EPS estimate of $2.70). While we expect 3Q (June) and 4QFY98 (Aug.) to be in line with current estimates, we believe it is increasingly likely that the Company will have dramatically higher earnings in FY99 [sounds like HP to me].
-- We believe that Jabil can attain current estimates entirely through growth at its existing customer base, including market share gains with, among others, Cisco and Gateway. We also expect customers that are going through inventory reductions or product transitions, such as Quantum and 3COM to return to historic volumes over the summer.
-- We also anticipate major new strategic relationships with leading OEMs in the computer and telecom equipment industries. Historically, Jabil has not had underutilized capacity beyond a period of 6-9 months without adding new customers. Management indicates it does not intend to fill its plants with overflow production, but is fully committed to developing long-term strategic partnerships. In our opinion, it is likely that Jabil will add one or more global OEM customers in the next 3-6 months.
-- Our current FY99 revenue and EPS estimates of $1.61 billion (vs. an
estimated $1.28 billion) and $2.39 (vs. an estimated $1.92) assume no
meaningful new customer revenues. We believe any new strategic relationships would provide incremental growth beyond our current 25% revenue and EPS assumptions [could be that the HP deal causes a revised report to come].
-- Jabil shares are currently selling at 14.7x our CY99 EPS estimate of $2.70, a substantial discount to several of the Company's top-tier EMS peers, to the broader market, and especially to its projected 35% long-term growth rate.
With the increasing likelihood that our estimates will prove conservative, we are upgrading our rating to "strong buy" and increasing our 6-month price target to $54, 20x anticipated CY99 EPS.
Folks, I like what they said, and am sorry I sold some of my buy-in shares. But I am still long and strong on this stock. Anyone got the Cowen report yet?
Dennis |
