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

To: Johnny Canuck who wrote (32594)	6/4/2001 10:31:59 AM
From: Johnny Canuck	Read Replies (1) \| Respond to of 70692

09:52 ET ****** Compaq (CPQ) 15.79 -0.11: Expect a lot of research from the brokerage houses on potential misses now that the end of JunQ is in sight. Merrill Lynch met with Compaq management and described them as enthusiastic and optimistic regarding the company's strategic positioning while employee morale remains solid. As for JunQ, the firm expects CPQ to make its EPS estimate, however, there could be some risk to its product revenue forecast of $7.4 bln due in part to Compaq's ongoing reductions of inventory levels which could lead to reduced sell-in to the channel....If this is the case, Briefing.com would not expect CPQ to pre-announce. Times for tough for Compaq. PC sales remain anemic and are slowing. Dell, which recently pushed past Compaq to become the world's largest PC producer, has been slashing prices to take share from its rivals. Couple the price wars and sluggish PC industry growth rates and you get increasing pressure on gross margins causing a drain on the company's cash. That spells bad news for CPQ and the others as analysts have been slashing estimates. Also, Compaq's foray into the enterprise hardware market is also weighing on the shares as IT spending on storage has also slowed. However, at least with the latter, the money is there for the IT budgets, companies are just holding back on spending it. The PC market should improve next year. The general consensus is for flat sales this year followed by mid-teen growth next year. But our sense is that number could come down....In sum, we believe Compaq is near a bottom as much of the bad news has been priced in. If the stock were to break $14/15, we would head for the hills and wait it out as that is a key support level. Also, P/E even here is high at 28x. Briefing.com continues to expect Compaq to be confined to a trading range as there is little in terms of a near term catalyst for the shares. -- Robert J. Reid, Briefing.com