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Technology Stocks : How high will Microsoft fly?
MSFT 472.22-1.3%Nov 21 9:30 AM EST
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To: Sonki who wrote (11363)10/20/1998 11:44:00 AM
From: johnd  Read Replies (1) of 74651
 
Sonki, Regarding earnings forecast, I am not sure if you
were asking me, JohnD or John F D. But anyways, I will assume
you were asking my opinion.

First off, wall street expects revenues of 3.8 to 3.85Billion
with EPS of 49c mean and a range of 48 to 51c. I read somewhere
that the whisper numbers are at 52c.

I don't agree with wall street. I think revenues will be
4 Billion with deferred revenues of 700 million. EPS will be
about 53 to 54c. Including one time gain of 6c, EPS will be
59c to 60c.

Microsoft will see above expectation performacne in Japan due
a) Stronger than expected windows98 upgrade sales
b) Favorable currency movement.

Overall, revenues and EPS also will be boosted by strong sales
of NT and the larger unit sales of sub 1000s.

I expect wall street analysts will be guided that December Q will
be sequentially up slightly and same for Q3 and Q4. So all in all
analysts will be forced to move EPS forecast upward from a mean
from 2.15 to 2.20 in about 1 - 2 weeks.

But for the short term fear of DOJ action, the stock should be
trading at 126 or so. Even at 2.20 EPS for Fiscal year, it is
trading at 46 PE for this FY. That is a PE to growth of about 1
considering last 10 year average growth.

I am of the opinion that the stock is undervalued by about 20%
at this point at 101, dated 10/20/98

johnd
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