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Technology Stocks : RATIONAL SOFTWARE- BUY OR HOLD -- Ignore unavailable to you. Want to Upgrade?

To: Randy Ellingson who wrote (2375)	4/23/1998 5:52:00 PM
From: Adam Smith	Respond to of 3115

Congrats to all investors with guts who bought when Levy bought Takes guts to stick thru the wall of worry. Here's another briefing.com analysis. I still think shorterm upside is 20 or so. May get caught up in the frenzy though and go above 20. At least valuation is supported at that price. RATIONAL SOFTWARE (RATL) 15 15/16 The investment community is having an extremely positive reaction to RATL's latest earnings report, particularly considering that the $0.12 earnings-per-share figure was only in-line with analysts' expectations. Already, the stock has been upgraded from "buy" to "strong buy" at Hambrecht & Quist, from "market perform" to "market outperform" by Goldman Sachs, and from "neutral" to "buy" at First Albany. According to H&Q, the software systems developer's Q4 bookings exceeded billings for second consecutive quarter, the company released key new products on schedule, and operating performance as measured by cash flow from operations exceeded expectations. Moreover, RATL management expressed comfort with the current Street mean earnings expectations (Q1 $0.09 and FY99 $0.54) on the conference call. Based on building momentum at the company, H&Q raises its Q1 estimates from $0.06 a share (on revenues of $78 mln) to $0.09 a share (on revenues of $81 mln). Estimates for full year 1999 were increased from $0.50 a share (on revenues of $370 mln) to $0.55 a share (on revenues of $375 mln). The firm is particularly bullish on the prospects of Darwin, the company's load and functional test product. The firm views the release of the "breakthrough" product to beta sites, after a six-month delay, as a victory. Over the next 12-months, H&Q expects RATL shares to reach $20 (or approx. 30x its CY99 estimate of $0.64), as it expects the stock to trade at about par with the company's long-term EPS growth rate, which it estimates at 25%-30%. First Albany establishes a price target of $18.