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Technology Stocks : Creative Labs (CREAF) -- Ignore unavailable to you. Want to Upgrade?

To: Rutgers who wrote (4513)	10/21/1997 8:49:00 PM
From: jgideon	Respond to of 13925

OK, I'm back from putting my toddler to bed. Let me explain my position in a little more detail. I was discussing CREAF with my wife at lunch today. She is a 2nd year MBA at Columbia. She is in tune with the theoretical view of the markets, while I have a more experiential view of the markets. However, together we agreed on one thing: if the market is only giving CREAF a P/E multiple of 12, then the lead steers do not see a good source of long term revenue for this company. This company has excellent short term growth and has delivered extremely well the past 5 quarters. Why doesn't the P/E multiple show some respect? I've looked at several (5-6) analyst reports on CREAF and only one had a bullish nature. Most gave only a 13% five year growth rate and a couple predicted revenue declines starting in the year 2000. The focus was on the diminishing returns of the sound card dominance. They did not believe multimedia would amount to anything significant. They did not identify where new revenue sources would come from. Hence, I believe that they will pay attention to the top line as well as the bottom line. Now, here we get to your mention of the GOOD news, WF. It seems that multimedia has amounted to something, in the way of 35% of the profits. The breakdown of the revenues is very important to shake the idea of a one product company that many of these folks have. Once the analysts are swayed that there is a good future revenue stream from such products, then estimates will be revised and we'll get the upgrades and a more respectable PE. That's my story and I'm sticking to it. jg

To: Rutgers who wrote (4513)	10/21/1997 10:04:00 PM
From: junjun dator	Read Replies (1) \| Respond to of 13925

Everything is falling into place for this company. With a trailing 12-month EPS at $2.41 a very conservative PE of 12 translates to a stock price of $28.92. The market can now put to rest their belief that CREAF is a one-product company. With revenue and earnings growth coming from both their existing and newer product lines the Street may soon give the company a more generous PE, say 20 (= $48 share price). CREAF and my other holding, QNTM, will surely make my day tomorrow. Congratulations to all.