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

To: still learning who wrote (5717)	11/26/1997 1:07:00 PM
From: Rob S.	Read Replies (1) \| Respond to of 9124

As much as I hate to admit it, Vanni's basic point is correct to a significant extent. The HD drive sector has average historical multiples of around 9-12 with momentary lows as far down as 5. Quantum's own range had recently moved to the upper-end of it's historical range. The market tends to discount forward looking earningsw projections for DD sector stocks because earnings are so volitile due to past experience of rapid earnings errosion caused by over-supply driven price competition. Quantum's fundametnals have been improving nicely over the past several quarters and their diversification should cause them to be valued differently than a purely historical valuation model. Considering the historical record, the nature of the DD business, and Quantum's great strategic position and diversification, I think that QNTM is now undervalued against current earnings and greatly undervalued against probable future earnings. The FUD factor will probably not be cleared out completely until sales and earnings are better understood. I am holding/buying at this time in anticipation of very nice appreciation in the coming months - by Feb of '98.

To: still learning who wrote (5717)	11/26/1997 3:45:00 PM
From: Vanni Resta	Respond to of 9124

still learning: That sounds reasonable. But I don't know about your foward earnings number. I just checked one of the earnings reporting services. WDC is valued at 8.4 times 6/99 earnings, and SEG is valued at 9.2 times 6/99 earnings. The 3/99 forward earnings for QNTM are actually 3.24. So if you give QNTM the valuation of "the group" (which I agree is a debatable point) and put it at 9 times, you get 29 1/8 as a "fair valuation." So, yes, you could argue that it is $2 undervalued today at $27. On any given day, though, just about any tech stock can be $2 below its "fair" value. Then put a "current" p/e of around 11 on those forward earnings, and you get $35 a year and a half from now. (By then, though, those earnings will have been revised upwards, so this reasoning is faulty on that count.) But that problem aside, yes, that's about 30% plus over a year and three months, which is not a bad return at all. And it could go much higher if the sector patches up its pricing problems. This is actually what I think will happen. But in a year? Two? Not even Sam knows. And don't forget, once the sector does patch up its pricing problems, it will take months before investors regain confidence that it will stay that way. The main point on QNTM, though, is this. I think most of the bad news is out on the sector and QNTM has taken its hit. So it has little downside risk left at $27. My problem with the stock is that it also still has questionable upside compared with some other options. BTW, does anyone know what a "fair" forward p/e is for the tape sector that QNTM is in? And who are the representative companies there? Sam? Happy Investing! Vanni