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Technology Stocks : BAY Ntwks (under House) -- Ignore unavailable to you. Want to Upgrade?

To: Vish Vishwanath who wrote (4090)	2/6/1998 5:03:00 PM
From: WBendus	Respond to of 6980

Vish, Typically price targets set by analysts are 12 month targets. I would not pay much attention to this one particular price target because it is clearly obtainable well before the end of a 12 month period. Once the stock breaks decisively above $35, this analyst will raise his targets to a range which would put Bay's valuation closer to its peers. I would suspect that Bay will make $35 to $38 just prior to the end of the March quarter and continue up into the low 40's shortly after earnings are released, pending any sequential growth during the quarter. A tech stocks valuation is typically measured by its PEG (price/earnings to 5 yr growth estimates), which historically has tended to be around 1.1 to 1.2. With Bay at $31 and its 5 yr growth rate currently at 26% and F98 Estimates at 1.09 and F99 at 1.57 (quick math yields an estimate of $1.39/sh for the next 12 mos), Bay's PEG = (31/1.39)/.26 = .86. Even a PEG = 1 would suggest that Bay should trade at $36/share and a PEG of 1.2 indicates $43 3/8 a share. I fully expect that Bay could see new highs by year end. At its current PEG every penny of increased earnings = .22 in share price, at a PEG = 1 every penny = .26 in share price and at PEG 1.2 every penny = .31 in share price. Therefore, as Bay demonstrates to the street that it is growing faster than expected it should see its share price soar as a result of an increasing PEG and slight increases in earnings. Right now, holding out the streets belief in the company, the stock is between 14% and 29% undervalued. Stated another way, the stock should be between 16% and 40% higher than current levels. Wayde.