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Technology Stocks : MRV Communications (MRVC) opinions?
MRVC 9.975-0.1%Aug 15 5:00 PM EST
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To: Roy S. Newman II who wrote (2423)3/7/1997 9:35:00 PM
From: WBendus   of 42804
 
Roy, For your sake I sincerely hope you covered some time ago. Where we sit now with networking stocks is with a 28% correction form 52 week highs. Valuations on pe's on most of these stocks is near a 40% discount to their growth rates. When you have a company like MRVC that is trading at 27 x earnings with a growth rate projected to be 47% that is a 43% discount. Once all has settled out in the networking industry it is expected that growth move to 30% to 40%. Stocks with that kind of growth should probably settle out to trade at 1 to 1.1 times growth or, in other words, with pe's around 30 to 44. This would imply that MRVC should trade fairly between $24.30 and $35.64.

The case for the $ vs JY looks like trouble but the dollar has made an impressive rally thus far and I wonder how much further it is going to go given the trade that Japan does with the US. There is already speculation that the Japanese Government is going to step in and sell dollars. Prices paid for dollars with yen have risen 10% since November and 17% from the lows back around May '96. If the dollar is nearing a high, and with the price cuts the networking industry has initiated coupled with strong demand over seas for networking products , than recent moves must be signaling a bottom. For MRVC who supplies components rather than the cards this most likely means a even better opportunity ahead than has been projected. I presume this bottom will shape out like a V and we will see the industry rally 20% with MRVC forging ahead 40% going into late summer posibly starting next week.

JMO
Wayde.
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