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Technology Stocks : Dell Technologies Inc.

DELL 120.35

-1.9%

12:01 PM EST

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To: Dennis who wrote (58435)	8/15/1998 4:43:00 PM
From: Geoff Nunn	Read Replies (1) of 176387

Dennis, Where will Dell be in 5 years? U.S. stocks historically have appreciated at about 10-11% per year. This, of course, is an average with many peaks and valleys in between. If the market continues to perform at this rate, Dell should do better than 10-11% given its above average risk. Dell's higher risk is reflected in its beta and its price volatility. One reason Dell is risky is that it produces in a capital goods industry. Such industries normally fare poorly during recessions. Dell is also risky because of the high uncertainly of its continuing cost advantage over competitors. If rivals find a way to emulate Dell's business model, Dell shareholders are in for big time losses and its Katy bar the door. Such an event doesn't seem likely anytime soon, but the odds it will happen are anyone's guess. My feeling, for what it is worth, is that the market is pricing Dell to yield an expected return of 16% per year. If Dell appreciates at that rate, the price will rise by 110% over the next 5 years, which would put the price at $221.81. Geoff

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