Has every one seen this CPQ "top pick"? I've seen bits and pieces of it before, but not in context.
Don't really understand that if 1999 is to be $2 per share, they can't go the whole hog and move the target to $60 on the basis that CPQ will earn a p/e ration of 30 in 1999, in anticipation of 2000.
Maybe they are leaving room for the inevitable upward surprises.
Victor
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COMPAQ COMPUTER CORP. (CPQ: $26)# 10/15/98 Recovery on
Track Earnings Per Share Old New P/E Ratios (FY:Dec.)
1999E $2.00 $ 13.0 1998E .47 55.3 1997A 1.34 19.4
Rating: TOP PICK
Change: None 12-Mo.
Target: $50 CPQ reported in line Q3 EPS $.07 versus $.35. Compaq's PC business posted strong (38%) unit sell through and sequentially higher ASPs.
We have left unchanged our Q4 estimate of $.37 and our 1999
estimate of $2.00. We continue to rate CPQ our Top Pick and
believe the stock could approach $40/share over the next six
months. Compaq needs to maintain 30% unit growth and
experience single digit declines in ASP over the next five
quarters to achieve our CPQ revenue growth forecast. We
believe overall PC units will accelerate during the first half as
corporations make a mad dash to upgrade remaining non Y2K
compliant systems. Compaq's success and the performance of
its stock over the next 4 quarters will be based on the
company's ability to drive operating margins from the current
2.0% toward the company's goal of 15%. We believe CPQ will
be successful in achieving 11% operating margins in 1999.
CPQ stock is not only cheaper than DELL, GTW, AAPL and
MUEI but its also cheaper than IBM, SUNW, HP, DGN and
UIS. This, despite being the largest PC company in the world
and on the brink of significant margin and earnings recovery.
CPQ is the IBM of 1994. We reiterate our Buy rating
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