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Technology Stocks : Cascade Communications (CSCC)
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To: Augustus Gloop who wrote (1805)1/24/1997 4:35:00 PM
From: Robert Scott   of 3743
 
10 points huh.. I agree there should be some kind of a bounce but a 23 point drop is serious - think there's some real disappointment by the analysts that may squelch any attempted rally. I wouldn't be surprised to see a price over 45 next week but i think people who held off today will get nervous over weekend & sell into the rally.

At any rate, I think the stock may go lower before next quarter but I do believe this company is in the right business at the right time and will do fine over next several years. This really was a gift to me and am starting to accumulate.

If you listened to the call, some of the analysts were irritated by CSCC not providing guidance on sequential growth - CSCC said they never do. They said they are comfortable with 1997 revenue projections of 50% growth = $510M. If that's what they do and get back to 30% op margin, 6M in interest, stay at 40% tax rate, and have 105M shares = $.91 = 25% growth - this is what has analysts so concerned. The decline in op margin from 33% to the middle of their target of 29%-31% and the increase in shares is what is decreasing the EPS so much. If they do $600M - which is what I came up with figuring 50% FR growth = $375M + $135M ATM at 100% growth + $70M RA and $20M other - with the same %s = $1.06 = about 50% EPS growth - down significantly from 1996. Of course by the end of the year, they will have all 5 product lines in high gear so will have nice growth for 1998.
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