FWIW: Russ
Friday February 4, 9:01 am Eastern Time
Company Press Release
SOURCE: Banc of America Securities LLC
Consistent Execution Key to Picking PC Industry Winners, Banc of America Securities Analyst Tells Investors
Look for Upcoming Execution Improvements to Drive PC Stock Outperformance
SAN FRANCISCO, Feb. 4 /PRNewswire/ -- The following is being issued by Banc of America Securities, a member of the National Association of Securities Dealers, CRD number 26091:
Seasonal execution patterns lead to significant outperformance for PC industry stocks after the first quarter, according to Banc of America Securities' senior PC hardware analyst, Kurt King.
(Photo: newscom.com )
The reason is that execution problems are concentrated in the first quarter and recoveries are seen through the year. ``Vendors have historically overreacted to sequential demand improvements in the third and fourth quarters and have inflated their fourth quarter results by stuffing the channel with inventory,' said King.
Vendors traditionally clear the inventory in the first quarter and lower expectations for coming quarters, blaming weak demand. The result is that PC stocks have historically underperformed the S&P 500 in the first quarter and significantly outperformed the rest of the year.
While the industry did not see channel stuffing this year, it did see a surrogate for stuffing -- a Y2K related demand slowdown.
King believes that PC stock outperformance following the first quarter is likely to occur in 2000, as PC company execution improves. A 15% drop in the PC group year to date and lingering investors' fears of secular demand slowdown have created an opportunity for investors to buy PC stocks.
King's top picks are Compaq Computer (CPQ, $28.00, Buy), Gateway (GTW, $63.25, Buy), Dell Computer, Inc. (DELL, $38.50, Buy)*, and Apple Computer (AAPL, $103.31, Buy)*, which all have upside potential of between 30 and 50 percent to his target prices.
King made his comments to investors yesterday at the 17th Annual Banc of America Securities' Technology Conference, which runs through Friday, February 4 at the Ritz Carlton in San Francisco. This year's Tech Week will feature 195 presentations from public and private companies representing a broad spectrum of investment opportunities in communications services, computer and peripherals, distribution, networking, semiconductor, software and Internet industries.
``In the PC industry, company-specific sales growth is defined by competitive success,' said King. ``PC industry growth is a noise-level factor, not a useful metric. It just isn't material to predicting performance of individual PC stocks.'
PC industry fundamentals encourage divergent company performances, with commoditization making the PC market share particularly fluid, King noted. ``In this industry, companies succeed very much at the expense of one another,' he said.
King commented that supply costs and pricing trends contribute to volatility in the PC industry and lead to frequent mis-execution. He stressed that the PC market has historically rewarded consistent execution, and that this is the key variable in predicting individual PC stock performance.
Banc of America Securities LLC (BAS), a subsidiary of Bank of America Corporation, is a full-service investment bank and brokerage firm. With principal offices in San Francisco, New York City and Charlotte, BAS employs more than 4,000 associates in offices around the country, and with affiliates, offers capabilities worldwide.
Bank of America Corporation, with $633 billion in total assets, is the holding company for the largest bank in the United States, with operations in 21 states and the District of Columbia.
NOTE: * Banc of America Securities LLC currently maintains a market in DELL and AAPL. |
