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Technology Stocks : Dell Technologies Inc. -- Ignore unavailable to you. Want to Upgrade?

To: Patrick E.McDaniel who wrote (151947)	1/25/2000 3:22:00 PM
From: JRI	Respond to of 176387

Pat...looking at the next fiscal year... Analyst quarterly estimates are currently as follows: Q1 (.22) + Q2 (.24) + Q3 (.27) + Q4 (.30) In doing some, I'll call them conservative, quick/dirty forward projections...I assumed Dell would grow y-o-y revenues at 35% each quarter (or 35% for the year)...and net margin (easier for me, for quick and dirty) of 7.8% (which, looking back the last two years, has been an "average", maybe even a little "below-average" margin, not great/not bad... (I think that this is conservative...I am giving Dell some room for margin expansion from historical norms..given the expansion into higher end products, Windows 2000 release, Rambus...I would think margins should, in a lumpy way (of course) rise to consistently above 7.8%...somewhere in the low 8% consistently...of course, that would be nice for a few pennies EPS surprises for sure.........Also, I am assuming we get no weird component pricing shortages again...which is not a bad bet....1999 was unusual).. So, at 35% y-o-y rev. growth, and 7.8% net...assuming consistent share buybacks......I get the following: Q1: .22 + Q2: .24 + Q3: .27 + Q4 .29 So, they (almost) match analysts current estimates...except a penny low in quarter 4, '00.... Conclusion (?): During the next CC..and during year....Dell should encourage analyst NOT to raise earnings (EPS) expectations for '00....In order to give Dell a sufficient cushion to meet/beat analyst estimates/rev/earnings targets going forward.....what is currently happening should be avoided, if possible ... Also, if Dell hits current analyst estimates for next year.....Dell will acheive EPS of $ 1.02 in the coming year....Assuming Dell makes .20 this quarter...then EPS for the current year would finish as .72, which would represent y-o-y EPS growth of (only) 36%...72 vs. .53 last year...however... If Dell just manages to MEET current analysts EPS expectations for the next year ($ 1.02)..it would represent y-o-y % EPS growth of 42% ($ 1.02 vs. .72)...which would be a faster % EPS growth rate than in the current year...that should bode well for the stock... With 42% EPS growth rate, the stock can appreciate 35% from here, and still see a declining P/E...Given that Dell is already at strong value levels....35% appreciation from here would seem a minimum...(I am assuming a healthier rate environment going forward) Of course, 35% only gets us back to 57...I am looking for more (65-70)..because I think Dell will be successful in expanding margins past 7.8 net...although revenue growth could get near 35% by end of year........unfortunately, right now, IMO, it will be hard for the stock to really move up (and hold) until "the other shoe drops"..ie..the truth about this quarter comes out...better sooner than later, say I...