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Technology Stocks : Ascend Communications (ASND) -- Ignore unavailable to you. Want to Upgrade?

To: FrankInNYC who wrote (40522)	3/22/1998 9:59:00 PM
From: Jurgen	Respond to of 61433

Briefing network sector rating (3/23/98) 9) COMP - NETWORKING....3/2 [3/2 = short term market perform / longer term slightly outperform] Comment: While the days of explosive triple-digit growth are now a thing of the past, it is important to remember that strong growth in the soho (small office/home office) and Internet/intranet markets suggest that the group will deliver average annual earnings growth of near 20%-25% over the next 3 years. By comparison, the S&P 500 is expected to post growth over the same period of 7.1%. Despite projected earnings growth of more than 3x the S&P rate, the group currently trades at only a moderate premium to the S&P with a relative p/e of 1.62. By contrast many fast growth industries such as software, sport relative p/es of more than 2.0. So from a longer-term valuation perspective this group still looks pretty good. Of course, there is a good reason why the marketplace gives the industry only a moderate mark-up - price and earnings instability. Near-term, the earnings picture remains clouded by excess inventory, the effects of Asia's economic woes and the threat of an economic slowdown. The technical tone is also mixed, with only a few stocks exhibiting strong bullish trends. Consequently, the recovery rally is likely to run out of gas soon as traders begin to seek earnings justification before running the industry up much further (YTD group up 15.8%). While we contend that the worst of the selling is over for the sector, lingering earnings concernsindicate that the group will merely pace with the market over the near-term. Longer-term, favorable valuations, above market growth prospects and the a pick-up in industry consolidation (FORE, Newbridge, Ascend and Shiva) are all possible candidates) suggest that group will slightly outperform the market. As such we maintain our 3/2 rating. Stocks:Ascend Communications (ASND), Bay Networks (BAY), Cabletron Systems (CS), Cisco Systems (CSCO), FORE Systems (FORE), Newbridge Networks (NN), Shiva Corp. (SHVA), ThreeCom Corp (COMS), Vanstar Corp. (VST), Xircom (XRIC).