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

To: Jon Tara who wrote (4823)	11/11/1997 12:36:00 PM
From: SamuraiSam	Respond to of 9124

QNTM in another tailspin.... low 27's... with relatively no movement..in SEG or WDC... SEG even positive on the day... arrg, SS

To: Jon Tara who wrote (4823)	11/11/1997 12:41:00 PM
From: still learning	Respond to of 9124

Acutually, the difficult questions right now, is which earnings are you buying into? Visibility for CY 98 is low. But for QNTM, we are almost there (FY99). So let's look ahead. Please feel freee to correct or amend anything below as appropriate. Please do not introduce unsubstantiated earnings estimates (even though I did some speculation at the end myself (g)). What discount do you want to place on the stock for the current uncertainty. The PEG should be discounted accordingly -- IMVHO probably to 50%-60 of expected growth rate for earnings. Meaning (If they are predicted to do $3.73next year, and $3.02 this year with no downward revisions, QNTM will grow about 23%. If we discount growth rate by 40% we end up with a multiple of 14. If we discount it by 50% we get a multiple of 12. 14 * 3.73 = 52.22 12 * 3.73 = 44.76 But if the market is focusing on this year's earnings still, and is also discounting the multiple to closer to 10x (the historical magic number) then we get a lot lower fair market value. 10* 3.02 = 32.02 (using current estimates) 10* 2.53 =25.30 (using .60 for this Q and .7 for next, really ugly #s, but assuming price war erupts and QNTM stays somewhat insulated from it. Clearly valuation and PE go into the toilet as the both go down together, creating a vicious cycle. Which scenario is the right call? IMHO the downside is mid 20s, since we are almost through this year anyway, and as some have siad Dec/Jan are best times for stock market. But after Jan, we are beyond the great YOY comparisons, so QNTM is no longer the dramatic comeback kid. On the other hand TTM valuations look better and better, presuming the price war, if there is one, stays short and confined somewhat (and DLT continues to carry the team). Comments?