steve "love boat" levy's latest TLAB report. major excerpts, anyway.
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Tellabs, Inc: Visit to Lisle Builds Further Confidence in Tellabs Story
Author: Steven D. Levy 1(212)526-2499 / Sender Cohen x3777 / Andrea Green x3860
Rating: 1
Company: TLAB
Rank (Old): 1-Buy
Rank (New): 1-Buy
Price : $81 7/8
52wk Range: $93-31
Price Target (Old):$110
Price Target (New):$110
Today's Date : 02/24/99
Price (As of 2/23): $81 7/8
Revenue (1999): 2.2 Bil.
Return On Equity (99): 32.4%
P/E 1999; 2000 : 33.3 X; 26.0 X
Disclosure(s): C
* Lehman Brothers hosted a road trip to Tellabs yesterday that was attended by more than 20 clients despite competing technology conferences. We spent two hours with Mike Birck, the company's CEO.
* The following are the highlights of his presentation to the group and the information that came out in the Q&A session.
* The bottom line of our visit is even stronger confidence in (1) Tellabs'
ability to meet and likely exceed our high-on-the-Street projections for this year and next and (2) the likelihood of investors seeing Tellabs in a more positive light than they have in the past six months and therefore giving the shares a higher P/E multiple.
* Either way we are comfortable reiterating our Buy (1) rating on Tellabs and it remains our number one idea with a price target of $110 by the end of the year.
Highlights of Tellabs presentation and information that came out in the Q&A session:
- Tellabs is developing a broader vision of its role in building the public
telephone networks of the future.
- Tellabs remains comfortable with its internal goal of growing its top and bottom line by 30% per year for the next few years.
- The critical new product introductions scheduled for the next few months are on schedule and there might even be a couple of additional ones that we were not anticipating.
- Sales of TITAN 5500, Tellabs' flagship SONET digital cross-connect system, are strong so far this year and the outlook for 1999 and 2000 could be better than expected. We are anticipating 26.4% year-over-year gains this year and 22.5% next year, but the actual growth could be 30% or higher.
- Sales of Martis digital multiplexer products, the company's number two product line, are also off to a good start, with Ericsson showing particular strength and Asian orders beginning to pick up.
- Future new product in the optical cross-connect area might not be as far out as previously thought -- a critical development in building investor confidence in the sustainability of Tellabs' long-term earnings growth rate.
- CableSpan, Tellabs' cable telephony product line, is also tracking ahead of our projections of $70 million and could hit $100 million in 1999. While this is not likely to have a material impact on the bottom line it could serve to raise Tellab's P/E.
The bottom line from our visit is an even stronger confidence in (1) Tellabs' ability to meet and likely exceed our high-on-the-Street projections for this year and next and (2) the likelihood of investors seeing Tellabs in a more positive light than they have in the past six months and therefore giving the shares a higher P/E multiple. Either way we are comfortable reiterating our 1 Buy rating on Tellabs and it remains our number one idea with a price target of $110 by the end of the year.
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Disclosure Legend: A-Lehman Brothers Inc. managed or co-managed within the past three years a public offering of securities for this company. B-An employee of Lehman Brothers Inc. is a director of this company. C-Lehman Brothers Inc. makes a market in the securities of this company. G-The Lehman Brothers analyst who covers this company also has position in its securities. |
