Silicon Saturday: PeopleSoft, Yahoo!,
Javelin Systems, Nextel
By Brian O'Connell
Special to TheStreet.com
10/17/98 12:15 AM ET
A selection of some of the most intriguing tech stock
ideas on the Web. The items presented do not represent
the views of TheStreet.com; rather, the collection is offered
as a service to our members who may be scanning the
Web for stock-related information.
PeopleSoft
Bill Schaff (10/12)
If you're like Bill Schaff, it's not hard to get excited about
PeopleSoft (PSFT:Nasdaq).
Schaff, co-founder of Bay Isle Financial Management in
San Francisco, downplays the importance of the
company's recent stock slide. It's down 64% from its April
20 high near 57 and down 47% for the year. "I expect
PeopleSoft to weather this financial storm and rebound
strongly in the next upturn," he says.
Schaff says the company's problems -- like those of many
enterprise software companies -- are short-term. Revenues
from Y2K compliance software should be rolling in soon,
and PeopleSoft's price-cutting campaign to stave off
competitors like SAP (SAP:NYSE ADR) is only temporary.
"PeopleSoft's share price has been hit hard because the
company is under pressure to cut prices to compete with
SAP, which is attacking PeopleSoft's dominant position in
the market for human-resources and public-sector
applications," said Schaff. "But SAP hasn't been
successful enough to justify the precipitous decline of
PeopleSoft's share price."
"The stock trades at 23 times next year's consensus
earnings of 91 cents. Yet, PeopleSoft is increasing its
revenue and earnings more than four times as quickly as
some industrial companies that are selling at similar
price-earnings multiples."
More information can be found at: www.techweb.com
Yahoo!
Adam Lashinsky (10/9)
Can Internet stocks stop their free fall? Maybe not -- at
least for now.
That's the sentiment expressed by San Jose Mercury
News columnist Adam Lashinsky after speaking with
William Meehan, chief market analyst with Cantor
Fitzgerald in Greenwich, Conn., who's decidedly bearish
on formerly safe tech stocks.
Take Yahoo! (YHOO:Nasdaq). Lashinsky says Meehan is
down on the company, particularly since shares fell 8% to
just below 105 on Oct. 8. (They've since recovered that
loss.) "The Net stocks have much more than a lot of
downside left," Meehan says. "They will break, and break
much harder than even I can imagine."
Citing "wildly unrealistic" earnings estimates, Meehan told
Lashinsky that things will get worse before they get better
for Internet companies like Yahoo!.
More information can be found at: www.sjmercury.com
Javelin Systems
Jim Oberweis (10/9)
The next time you order a chicken Gordita at Taco Bell,
take a look at how the counter clerk enters your order. He
or she will log your order on a touch-screen computer
developed by Javelin Systems (JVLN:Nasdaq).
The firm designs, develops, markets and sells
open-system touch-screen point-of-sale computers. Javelin
specializes in systems for restaurants, but also serves the
specialty retail, industrial and information kiosk markets.
Jim Oberweis, editor of The Oberweis Report newsletter,
says he is high on Javelin, and has bought 45,000 shares
of the company for his asset management customers in
recent months. He says a client list that includes Taco
Bell, Dunkin Donuts, Burger King and Baskin Robbins
spells good news for investors.
The company's fourth-quarter revenues rose an
eye-popping 332% to $11.6 million, compared with $2.7
million at the same time last year. Earnings per share were
13 cents versus 1 cent over the year-earlier period.
Oberweis predicts revenues will skyrocket from $7 million
in 1997 to $30 million in 1998 and $55 million in 1999.
More information can be found at: www.investools.com
Nextel
Christopher Larson (10/15)
Wireless communications behemoth Nextel
(NXTL:Nasdaq) rates a strong buy from Prudential
Securities telecom analyst Christopher Larson. "In light
of the recent decline in Nextel's stock price and in
anticipation of upcoming positive news, we are raising our
rating on the company's shares from hold to strong buy,"
he wrote in Red Herring.
Nextel is down 28% from its recent 52-week high, but he
expects imminent good news will fuel interest from the
investment community. "The company is beta-testing a
smaller, lighter cellular phone, manufactured by Motorola
(MOT:NYSE), that offers features such as speakerphone,
vibrating alert, and multiple lines per phone," says Larson.
In addition, Larson reports Nextel may be considering
selling its wireless towers, which could bring in $1 billion to
$2 billion.
That would reduce Nextel's current capital needs and debt
levels, leading to positive company valuation levels.
"Furthermore, Nextel will soon be one of the first wireless
companies to achieve positive operating cash flow in
domestic operations. We are forecasting a break-even
operating cash flow for domestic operations in the third
quarter of this year and a positive operating cash flow for
both domestic and international operations in first quarter
1999," adds Larson. "As a result of this flood of good
news, we are also increasing our 12-month price objective
from $33 to $34." Shares currently trade at 17 after falling
12% Thursday due to a disappointing third-quarter earnings
report.
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