Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Technology Stocks : EDS - Recent pullback a buy opportunity??? -- Ignore unavailable to you. Want to Upgrade?

To: t2 who wrote (1779)	9/25/2002 10:20:39 PM
From: Orwell	Respond to of 1841

Betting on EDS? Anyone can paint a negative or positive picture of any company. Bottom line in these situations is unless the company is going out of business, then it is a screaming buy once it settles down technically (and the bear market subsides). Enron wasn't a real business. Alot of other utilities and telecoms are being crushed by mountains of debt. Certain companies have cooked the books and mistated revenues. EDS isn't in any of those boats. They have a sound business model as more companies wish to outsource their IT. Their debt is manageable. They have lots of room to cut costs, and cut superfluous employees on their consulting/project side if that business has dried up. If worse comes to worse they can suspend their dividend, and explore alot of other avenues at their disposal. Have they made alot of dumb mistakes? Yes. They should be more diversified in the sectors they do business with (e.g. too many airlines). They should be more discriminating and walk away from deals if they can't get the right price. And they shouldn't be playing around with financial instruments that can go sour on them and wipe out half a year's worth of free cash flow. And they should be quicker to react to market conditions in matching their expenses to their revenues (mostly all public companies are in this boat now during the bear recession). I would say at the bottom of the pile of this year's disasters are companies that have either gone out of business or are sub $5 stocks. In the middle are the Tycos who still have real challenges, but are hanging in there. And at the top are those like EDS and Disney who will be back on track never to look back. My targets for both Disney and EDS are about the same--$18 within the next 6 to 9 months; $24 within 12 to 18 months. EDS is trading round about book value. Here's a stock for $5billion market cap that has the ability to generate $500million a year in free cash flow, and profits close to $1billion. Of course, this analysis assumes that we have all information at hand, and aren't going to be blind-sided by anything new and negative. Again, this is true for any company that you are invested in right now, so the odds for EDS are no different than for any blue chip you wish to name. As such, I have gone long on EDS at $11.50. I'd be willing to hold it down about 10% below that, and I'm not looking to flip on some bounce for a couple of bucks. Again, if it isn't going out of business, then I should be able to double my money. If something new pops up, I will have the stops to protect me. Good call by a well known analyst on the downside, now time to turn the tables. O.