Hoie: I'm not a cheerleader but let's have a go at cheering you up.
The rational bottom is $30-32 (on a very bad market day on heavy down volume it could momentarily stray into the $20's. A bad day might be precipitated by a fall in the price of DELL to where it should be at p/e of 40, but the chances are that DELL will just fade gracefully towards the end of March as CPQ is rising).
We are currently trying to repair all the damage and change resistance levels at about $35/36 into support levels. The strong rise the day before yesterday to $35 1/2 demonstrates that buyers are waiting.
We don't necessarily need news to change sentiment. We need no bad news. After that we could have sounds from the company to the effect that (a) earnings will meet original expectations (b) one or two content providers for AV have been signed up. The institutions will start buying big in mid-March and certianly by the end of the third week. They will position themselves for a run-up. By the last week of March we will be in a new trading range $36-$41. As the market rises in anticipation of good earnings, CPQ will start taking runs at $45 and then $47. One week before earnings, with confidence about earnings beginning to percolate, it will start trying for $48-50. If it reaches those levels it will be on spikes with immediate pull- backs.
Assuming earnings are good, the CPQ bi-annual Innovate Conference in Houston, and the Shareholders Meeting will cause a fusion of strategy, and good news which will carry it to $50 and beyond.
I think then it will back and fill for a couple of months. The summer rally will take it towards $75 in August-October. By then, earnings estimates will have been revised upwards and the p/e will be reflecting optimism about the AV spin off which will be announced about August. The p/e will go to 25-30 forward earnings, which will be $2.60-2.80
The Fall will be choppy with worries about a fall off of demand from YK2. Might be a good time to sell before getting back in mid-December, 1999. |
