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Strategies & Market Trends : Technical analysis for shorts & longs -- Ignore unavailable to you. Want to Upgrade?

To: Return to Sender who wrote (28465)	9/26/2000 10:32:25 PM
From: drsvelte	Read Replies (1) \| Respond to of 69913

Harry may have posted this last week (or maybe I did --gg) Trader's Edge: Earnings Season Growth/Value Plays 20-Sep-00 11:30 ET Blood letting in the tech sector has simply served to reduce valuations from absurd to obscene. In a few cases, however, the recent selling seems to have produced real value -- the kind that in a few cases even a Warren Buffett could appreciate. Price action in these stocks suggests that investors are bracing for an earnings shortfall or an indication by the companies that growth is slowing. The result is that many potential buyers have decided to stand on the sideline until the companies have proven that their stories remain intact. This is why we are looking for a strong post-earnings rally in a number of devastated growth names that now find themselves in the bargain bin of the tech world. Copper Mountain Networks (CMTN) Description: Manufacturer of Digital Subscriber Line (DSL) communications products to telecommunications service providers. Projected EPS: 2000= $0.98; 2001= $1.37 (40%) P/E Ratio: 2000= 46; 2001= 33 PEG Ratio: 0.82 52-Week Range: $35 1/4 to $125 11/16 Analyst Ranking: Strong Buy (3), Buy (6), Hold (1) Earnings Upside: April period: 82%; July period: 9% Price Reaction to Earnings: April period: 15%; July period: -24% Tentative Release Date: Oct. 16 (after the close) Efficient Networks (EFNT) Description: Designer of high-speed digital subscriber line (DSL) customer premises equipment for the broadband access markets. Projected EPS: 2000= 0.79; 2001= $2.74 (+247%) P/E Ratio: 2000= 50; 2001= 14 PEG Ratio: 0.56 52-Week Range: $31 to $186 13/16 Analyst Ranking: Strong Buy (5), Buy (4), Hold (1) Earnings Upside April period: -220%; July period: 80% Price Reaction to Earnings: April period: 6%; July period: -13% Tentative Release Date: Oct. 17 (before the open) Foundry Networks (FDRY) Description: Manufacturer of an end-to-end suite of networking products, including Internet routers, Gigabit Ethernet Layer two and three switching routers and Internet traffic management systems. Projected EPS: 2000= $0.74; 2001= $0.95 (28%) P/E Ratio: 2000= 87; 2001= 68 PEG Ratio: 2.42 52-Week Range: $51 7/8 to $212 Analyst Ranking: Strong Buy (7), Buy (5), Hold (1) Earnings Upside: April period: 55%; July period: 19% Price Reaction to Earnings: April period: 1%; July period: -21% Tentative Release Date: Oct. 18 (after the close) Tut Systems (TUTS) Description: Manufacturer of communications products that enable high-speed data access over the copper infrastructure of telephone companies. Projected EPS: 2000= $0.08; 2001= $0.51 (531%) P/E Ratio: 2000= 1010; 2001= 158 PEG Ratio:0.29 52-Week Range: $24 to $120 3/8 Analyst Ranking: Strong Buy (2), Buy (5), Hold (0) Earnings Upside: April period: 21%; July period: 200% Price Reaction to Earnings: April period: 25%; July period: 26% Tentative Release Date: Oct. 18 (after the close) Company PEG Price/Sales LTM EPS Upside (latest qtr) Price Reaction to Earnings (Avg 2 qtrs) Decline from 52-Week High Total Copper Mountain 3 2 4 3 3 15 Efficient Networks 2 1 2 2 1 8 Foundry Networks 4 4 3 4 2 17 Tut Systems 1 3 1 1 4 10 Efficient Networks is near the top of each of the categories listed in the table. Unfortunately, company also happens to be in the sector most at risk of experiencing near-term earnings inconsistency. In addition to being impacted by the Verizon strike, moderated growth outlooks issued by a number of DSL services providers suggests that future shipments will be impacted. In many investors' minds the writing is on the wall that the companies in the DSL equipment space will be forced to lower guidance. As a result, sector companies will need both strong quarterly results and extremely upbeat conference calls to calm investor fears. We view these stocks strictly as swing-trading opportunities. The key to the trade is that the companies come across with enough confidence in their visibility to convince investors that a mid-quarter blow up will not occur. Ability to accomplish this will open a 6-8 week window of opportunity for investors to participate in the valuation opportunity provided by the sharp decline in share price. However, we would look to exit within 4 weeks of the results being reported and the conference call completed.... Of course, if the company misses its quarter or guides down numbers, all bets are off.