John,
Well for someone short on time you sure spent a bit on that post. Thanks... Here's some points you may wish to consider over the weekend. However I have no misconceptions that anyone on this thread will take any of this to heart. But here goes anyway.
"CPQ trading off 10% from "the correction" as is Cisco."
CPQ is down much more than 10%, it reached above 38 in the past few weeks...that
would make its correction north of 20%....
" DELL still off
over 15% and still trading at 64 times trailing earnings. Continues to
look pricey at these levels and it's my belief folks are begining to
notice. "
chart1.bigcharts.com:80/chart?time=3&freq=8&uf=0&lf=1&type=2&style=88&size=1&comp=csco%3A6458,cpq%3A1331&r=schwab-lc-int&onbad=schwab-lc-bad&optsize=int&symb=dell&compidx=aaaaa%3A0&ma=0&maval=200&x=42&y=12&sid=1564&sec=c&xyz=627430349&s=20692
I believe my post mentioned since the correction...not since the past few weeks. My point here was to draw attention to the volatility and downside risk. Although there may be more potential DELL there is also more risk and clearly more exposure to downside. I don't think one can really argue with this point.
What has Dell's growth rate been (over the past 4/5/6 yrs.?)
I don't think this is all that important...question is what will it be. As for my comment about past PE I was using it as a measure against other computer makers whose PE's you should know are all under 30.
As for Cisco and Cisco's numbers relative to thier market versus Dell, Dell's numbers and Dell's market.
CISCO
Rev./Yr over Yr Growth
Q2'97: $1.6B/42%
Q3'97: $1.6B/34%
Q4'97: $1.8B/27%
Q1'98: $1.9B/23%
Q2'98: $2.0B/21%
Q3'98: $2.2B/25%
Q4'98: $2.4B/25%
Earnings/Yr over Yr Growth
Q2'97: .49/37%
Q3'97: .55/33%
Q4'97: .55/24%
Q1'98: .48/20%
Q2'98: .45/24%
Q3'98: .47/24%
Q4'98: .50/24%
CISCO's served market growth is estimated at 30% depending the market. I'm not going to reivew all the relavant research here (my arrogance I guess), but it's out there on IDC, Vertical, Delloro, Dataquest, etc. SO, given Cisco's past annual growth rate of around 50% it seems like it will be a reach for Cisco. They'll have to keep stealing business from competitors. On a positive note notice the consistency. Analysts love that. The last 3 quarters are killer and cisco has 35 quarters of meeting or beating estimates, so analysts really like it for these reasons.
DELL
Rev./Yr over Yr Growth
Q1'98: $2.6B/37%
Q2'98: $2.8B/40%
Q3'98: $3.2B/37%
Q4'98: $3.7B/39%
Q1'99: $3.9B/34%
Q2'99: $4.3B/54%
Earnings/Yr over Yr Growth
Q1'98: 1.08/61%
Q2'98: .59/51%
Q3'98: .69/43%
Q4'98: .81/38%
Q1'99: .44/39%
Q2'99: .50/72%
OK..interesting. I will say I find that DELL's revenue growth is very consistent and nicely linear - something I wasn't aware of. However the one thing that pops out at me again is DELL's mutliple in a market that is growing far slower than the market CIsco is in. Cisco's multiple is lower thans DELL's however the market Cicso addresses is growing about 50% faster. That would mean that DELL would have to smother thier competitors even moreso that Cisco is. The last quarter DELL posted unbelievable numbers. I can't imagine that this will change expectations to the upside - especially given the challenge to improve earnings with higher revenues....but what if expectations are indeed higher? Up until last quarter earnings had been sliding or flattening. THis will be a tough thing for Micheal to manage IMO.
.Dell will comfortably beat this quarter's
consensus again....it currently stands at .535...even if it moves to .55, Dell will bring in
(at least a .58 this quarter)...That will be enough to move the stock...probably even
before the earnings announcement....
Agreed, I think Dell will make this quarters earnings as well. I think I even said thia pup is good for another quarter or two. But given market growth rates and competitive...let's just say "desires" to improve their position in this market DELL will not be able to maintian IMO. Furthermore I've made a few comments about "replacement devices" known as Residential Gateway products which no one commented on. Yes, I have apparently earned a reputation here but I do think I provide content and perspective which if reviewed does have foundation.
Look at Microsoft....It is no longer growing at 50% a year,
Microsoft hasn't grown at 50% since 90 or 91. There growth however is very consistent as their stock valuation. Furthermore the last 2-3 years you'll see that Microsoft EPS have accelerated..from the mid teens in 93/94 to the mid 30's now. Will DELL's earnings accelerate?
(1) There is an enormous consolidation going on in the PC industry....All the little
players are struggling to survive....(worldwide).....Dataquest/IDC data backs this
up.....The big guys (the top 5/6 firms) only have around 50% world market
share...This will only increase...Given that HP is now committed (at least over the
next few quarters) to earning money vs. share, that IBM has not shown the ability to
grow marketshare at a multiple anywhere near Dell.........It looks like the main
beneficiaries of this consolidation will be Dell and Compaq.....How much is it worth
(to stock price's of Dell, Compaq) if there are only 5/6 PC manufacturers (of decent
size) in the world 5-7 years from now? How would this scenario affect economies of
scale, profit pressures, etc...Hmmm....
Agreed with you here, but again DELL needs to grow their position in the midst of more a more focus from HWP, IBM, and CPQ....and the small bit players scratching to earn a living. As long as DELL demonstrates that they can make good margins they will attract new investment and new campaigns from any of a number of competitors. This is marketing 101. Question...how is DELL going to battle these forces to continue to grow not just faster than their competitors - but MUCH faster.
(2) The 2nd half of the year is much better for all computer makers....this is a
historical fact....All are talking of rosy forecasts....And the stock is supposed to
(further) tank? Look at other industries, how many others are in their cyclical uptime?
(Stock)Investors dont have a lot of options here....
Agreed again. I think DELL will have a great quarter this quarter. Early 99 I believe DELL growth will slow dramatically.
(3) (I can send you some articles next week), but Europe is predicted to continue
huge PC growth in 1998 & 1999 due to (1) undercomputerization (2) Euros
implementation (3) Y2K (4) internet growth
I'd like to see those. Europe will show growth rates in the teens for new PC's. And, as new replacements products are brought to market (watch what IBM does with cable & wireless in the UK), the overall market may not even do that well.
(4) Asia's two biggest markets (Japan & China) are expected to grow at a fast clip
I think we all hope for this. However, Japan will not recover anytime soon and China is in sorry financial shape. I don't buy this one either.
OG |
