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Technology Stocks : Compaq -- Ignore unavailable to you. Want to Upgrade?

To: PCSS who wrote (83766)	7/26/2000 8:57:44 AM
From: Lynn	Read Replies (1) \| Respond to of 97611

Thread: ML issued a new research bulletin for CPQ this morning titled, "COMPAQ COMPUTER:Solid Q2 - Raising EPS Estimates." I do not consider this a full-blown, new research _report_ because only a short term target (34) is given. Here are some sections from the bulletin by Steven Fortuna and Michael Hillmeyer: 6 Month Price Objective: $34 Estimates (Dec) 1999A 2000E 2001E EPS: $0.32 $1.05 $1.40 P/E: 87.7x 26.7x 20.0x Investment Highlights: Compaq reported solid 2Q00 operating EPS of $0.21 and sales of $10.13 billion (up 7.5%), in-line with both our estimates and the Street. This represents a major improvement over the 1% yr/yr growth registered in the first quarter, and should go a long way toward building the new management team’s confidence with the investment community. We now have an even higher level of conviction than before, that Compaq will be able to achieve healthy, double-digit revenue growth in the 16% range in the back half of the year in tandem with further improvements in commercial profitability. As a result, we are modestly raising our 2000/2001 EPS estimates to $1.05/$1.40 from $1.00/$1.35. The basis for our increase is higher operating margin assumptions in Q3 and Q4, driven by mix shift as well as ongoing cost cutting and solid demonstrated operational execution. Given what appears to be improving momentum behind the numbers, we strongly reiterate our Accumulate rating on Compaq shares and set a price objective of $34, based on 24x our new calendar 2001 EPS estimate of $1.40. [snip] Importantly, we think there is a good chance the stock’s multiple could expand to the 28x-30x range by fourth quarter as investor sentiment continues to improve. [end of ML bulletin] Lynn