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

To: Just_Observing who wrote (1064)	8/21/2000 3:29:59 PM
From: Just_Observing	Read Replies (3) \| Respond to of 1184

Merrill says 3rd quarter in the bag Excerpts from MER Report Brett Hodess Samuel Wilson Sameer Desai Teradyne Inc. Business is on track and recent acquisitions add upside potential "Teradyne is tracking well toward our third quarter estimates. Bookings are on track for Q/Q growth. • Tight supply on certain semiconductor components for the J973 high end product line could cause a slight short fall on this one product line’s shipments and orders. However, other businesses, including Catalyst are stronger than we expected easily offsetting the constraints and allowing the company to meet or slightly exceed our estimates. • Teradyne announced the acquisition of two California based printed circuit board companies last week. These could provide upside to our estimates with in 6 months. We reiterate our Buy Rating and $110 price target." Investment Opinion "Reiterate BUY and price target of $110. We believe the stock should regain a valuation in-line with Applied Materials and KLA-Tencor as the leaders in their respective segments at 25-30x 2001 EPS estimates. Thus, our price target is $110, based on our 2001 EPS estimate of $4.00. We have not adjusted our estimate for the acquisitions discussed above yet. We note that our valuation analysis is very conservative. We estimate that 20% of our $4.00 EPS will come from contract manufacturing (Connection Systems) were the closest comparable is Sanmina. If we value this portion of the EPS at 50x like Sanmina, that yields a $40 price. The remaining $3.20 even at only 20x 2001, yields $64. Thus, the sum of the parts valuation is $104. This is nearly our price target even with a very low P/E multiple on the semiconductor equipment portion. Another way to look at it is that investors are buying the Connection Systems business at a 70% discount at the current price level."