levy's latest -- over a week old.
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Tellabs, Inc: And the New Product Announcements Continue
Author: Steven D. Levy (212)526-2499/ Sender Cohen x3777/ Andrea Green x3860
Rating: 1
Company: TLAB
Rank (Old): 1-Buy
Rank (New): 1-Buy
Price : $100 1/16
52wk Range: $100-31
Price Target (Old):$110
Price Target (New):$110
Today's Date : 03/30/99
Price (As of 3/29): $100 1/16
Revenue (1999): 2.2 Bil.
Return On Equity (99): 35.7%
P/E 1999; 2000 : 40.7 X; 31.8 X
Disclosure(s): C
Highlights:
* Tellabs announced an important new product yesterday, the TITAN 4500GS, which acts as a gateway between SONET and SDH networks.
* This announcement is on or ahead of schedule - another positive in our view - given Tellab's mixed history of delivering new products on-time.
* The initial release of the TITAN 4500GS should be available in May and while we believe this product is not likely to be material to 1999 earnings, it could be a source of some upside in the second half of this year.
* The new product announcement, combined with the bullish tone of the overall stock market, thrust Tellab's share price above 100 yesterday.
* We believe Tellab's stock price should have no problem reaching our current $110 price target and that expansion of the current P/E multiple and increases in earnings forecasts, or both could occur, resulting in the potential for the shares to rise above this $110 price target.
Summary:
Tellabs announced an important new product yesterday, the TITAN 4500GS, which acts as a gateway between SONET and SDH networks. We have previously stressed the importance of new products to the Tellabs story and this announcement is the first of three that we are expecting over the next few months. This announcement is on or ahead of schedule - another positive in our view - given Tellab's mixed history of delivering new products on time. The initial release of the TITAN 4500GS should be available in May and while we believe this product is not likely to be material to 1999 earnings, it could be a source of some upside in the second half of this year.
The new product announcement, combined with the bullish tone of the overall stock market, thrust Tellab's share price above 100 yesterday. The shares are now trading at 41x 1999 EPS and 32x 2000 EPS while we are forecasting a 28% growth rate. We believe Tellab's stock price should have no problem reaching our current $110 price target and that expansion of the current P/E multiple is possible and increases in earnings forecasts are likely, either of which should they occur would result in the shares rising materially above our target.
Tellabs remains our Number One investment idea.
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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. |
