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Technology Stocks : Compaq
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To: Aitch who wrote (55050)3/29/1999 5:48:00 AM
From: rupert1  Read Replies (1) of 97611
 
Aitch: Another comment on the very conservative Bear Sterns BUY.

*** Maintain Buy. Though we believe Compaq stock may be in the
$30-$40 trading range in the near-term as Compaq fixes its
channel issues and beefs up its direct effort, we believe Compaq
shares have potential significant upside to the $55-$60 range in
12-18 months (based on 22-24x potential Year 2000 earnings power
of $2.50) if Compaq can deliver on its goal on transforming
itself from a box builder to a systems/solutions provider
(implying an improvement in gross margins from mid-20s to 30%
with operating expenses around 15%-17% of sales).

Why 22-24 p/e? Its growth rate would justify 25-30 if it does all that B/S expects.

The $2.25 eps for 2000 is a gross underestimate. More like $3.00-3.50.
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