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Technology Stocks : All About Sun Microsystems
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To: cheryl williamson who wrote (11853)11/20/1998 7:05:00 PM
From: Alok Sinha  Read Replies (1) of 64865
 
Cheryl,
As you know the short term supply and demand determines the price. The P/E that the market ascribes also varies based on the level of interest rates and the company's growth rate / past track record, margins etc.

The expansion in multiple that your figures show is certainly not reasonable for a company such as SUN. Growth in revenue in the upper teens is probably the max that hardware vendors can accomplish in the current environment (DELL excepted). Even CSCO and ASND which are in high growth networking sector are finding it tough to push 30-35% revenue growth. Given SUNW's past consistency in operating performance, a think its long term forward P/E should average between 20 and 25.

I do not want to disparage day trading since day trading can be profitable proposition (just look at the internet stocks). Day trading in medium volatility stocks such as SUN, CSCO, DELL is probably a better trade-off from a risk return perspective. I guess it is an issue of how much time you have on your hands. Also the volatility that day trading creates in terms of price fluctuations provides value/fundamental buy-and-hold types to accumulate at reasonable prices. I usually write covered calls on my positions, and usually accumulate stocks through assignments on writing at-the-money naked puts, so I love the volatility as it allows me to collect high premiums.

Regards

Alok
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