***NationsBank Montgomery Remains Optimistic and Continues with BUY Rating on DELL***
FoD: I just checked my First Call service and found no sign of any comments from PAIN Webber. Yet, at 2:19 pm EST NationsBank Montgomery put out a bullish report on DELL. In fact, its much more upbeat than what they issued right before last Qtr's release. I would contend that Montgomery's Kurt King has MUCH more credibility than some newcomer from PAIN Webber (who doesn't back up his rating change with a serious report OR make himself available for comments). My hunch is the PW Mutual Funds were not performing well and they needed some cheap shares of DELL <GG> ...Anyway check out these highlights from the NationsBank Report:
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<<14 May 99 / Montgomery Securities /Kurt King
DELL: Reports 1Q Tuesday; Comes Down to Revenue Growth: We Remain Optimistic // Rating: BUY
--DELL reports 1Q FYOO next Tues. after the close followed by a conf. call at 2:30 pm PT / 5: 30 EST
--We expect 42% revenue growth, which is relatively optimistic -- We expect DELL to meet or slightly beat our consensus EPS estimate of $0.16, up 45% from last year's $0.11. Contacts have become very tight-lipped since last quarter's leaking of results but our sense from the marketplace is that the company succeeded in using pricing to accelerate top line growth from last quarter's 38% y/y level. Our relatively aggressive revenue forecast is $5.5 Billion, up 42% from last year's $3.9 Billion. The Street will likely take top line growth in the low 40's or above as a positive. We assume units grow 58% and that ASPs decline 10% y/y and 5% sequentially. We could see quite a bit of variance around our unit and ASP assumptions but view overall revenue growth as the overriding issue.
--Most importantly, we think DELL's US corporate sales saw acceleration during the quarter -- we believe the US corporate market, last quarter's weak area for DELL, regained some momentum from more aggressive pricing. DELL's small / medium business segment also appeared very strong. We believe the high-end server and storage lines that were introduced last year are supporting high double digit sales growth, similar to last quarter. Consumer revenues were likely up 50% or more, despite a tough comparison. We think DELL saw continued strength in Asia and Europe despite macro weakness in Germany and France.
--Operating margins will decline from last quarter's inflated level. We expect operating margins to decline 60 basis points sequentially but come in flat year over year at 10.9%. Last quarter's record levels were driven by expense controls meant to offset the top line shortfall; management has been clear in its intent to ease down margins from recent levels in order to drive top line growth. (Good call in our view -- the benefits of higher margins are one-time, while the benefits of more customers are ongoing.)
--As usual, the outlook should be bullish. We expect management to emphasize the abundance to remaining growth opportunities and defend the economics of migrating to lower PC price points, consistent with last month's analysts' meeting. We think management is well-equipped to address concerns that may arise about the sequential declines to ASPs and operating margins we'll likely see in Tuesday's results.
--With fiscal 1999 revenues of $18.2 Billion, DELL is the world's leading direct marketer of personal computers. The company's system revenue mix in fiscal 1999 was 64% desktops, 23% portables, and 13% enterprise. Its geographic mix in fiscal 1999 was 68% Americas, 26% Europe, and 6% Asia Pacific and Japan.
-- Estimated earnings for FY 2000 $0.75 P/E 56.3 P/E/G 125%
-- Estimated earnings for FY 2001 $1.00 P/E 42.0 P/E/G 93% >>
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Well, that doesn't sound too bad to me <GG> . LONG TERM investors should sleep well and TRUST MSD.
DELL will RISE AGAIN..!!
Best Regards,
Scott |
