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

To: S.C. Barnard who wrote (13676)	1/16/1998 10:51:00 AM
From: Mohan Marette	Read Replies (1) \| Respond to of 97611

Bear Sterns UPs Compaq-Price Target $110-$130.00 scba & thread: y'all seen this ? ================================================================= COMPAQ COMPUTER CORPORATION (CPQ-58) - BUY 15-JAN-98 ----------------------------------------------------------------- AT 50 . . . BILLION THAT IS Andrew J. Neff - BEAR, STEARNS & CO. INC. ================================================================= ----------------------------------------------------------------- * We are initiating our EPS estimates for Compaq through the year 2000 of $6.00 - which is higher than our initial indication of around $5.50 reflecting the impact of $50 billion in revenues at that point, as the company sees the impact of the growth of its enterprise business as well as benefits of continued market share gains. Below are some of the key points from an in-depth report we are publishing today. * Enterprise Growth, Consolidation Trends are Favorable for Compaq. We believe Compaq is poised to show dramatic earnings gains as it benefits from industry consolidation and restructuring as well as the growth of its enterprise computer business, furthering its goals of 1) becoming a broad-based computer systems company and 2) generating incremental growth in new areas such as communications products and computer services. * Price Target of $110-$130. In our opinion, a company with above-average growth and margins in a high-growth industry merits an above-average multiple relative to its peers in the S&P 500 and in the computer industry. Based on a multiple range of 18x- 22x our 2000 EPS projection - which would be below the company's growth rate and comparable to the S&P 500 - we think the stock could reach $110-$130 per share ($55-$65 post-split) within 12 to 18 months, providing a significant return to investors. * Growth Beyond 2000. We think Compaq is positioned to show continued growth as the computer industry enters the "Merced" generation (Intel's 64-bit microprocessor is expected in 1999). This new chip could enable the company to expand its available market and sell computer systems ranging from handheld PCs to mainframe-class products, servicing the entire corporate enterprise. *** CPQ shares is due to a two-for-one stock split payable January 20 to holders of record December 31. The company is scheduled to report its 4Q97 results on January 21 before the open. Conference call is at 8:30am ET. Please contact Investor Relations at 218-514-9549 for further information. ----------------------------------------------------------------- EARNINGS Q1 Q2 Q3 Q4 Mar Jun Sep Dec Year P/E Current 1996 $0.32A $0.30A $0.48A $0.63A $1.72A 33.7x Current 1997 $0.53A $0.60A $0.71A $0.81E $2.65E 21.9x Current 1998 $0.71E $0.80E $0.87E $1.11E $3.50E 16.6x Current 1999 $4.65E 12.5x Current 2000 $6.00E 9.7x ----------------------------------------------------------------- Summary and Recommendation. We reiterate our Buy rating on shares of Compaq Computer Corporation.