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

To: Darren who wrote (47724)	5/29/1998 12:51:00 AM
From: pat mudge	Read Replies (1) \| Respond to of 61433

Darren -- You quote a report issued on April 13. The following from Morgan Stanley Dean Witter was released on May 21, 1998. Rating: Outperform 52-week range: 60-22 Price: 47 Price Target: 55 Key Points: We have raised our 1998 estimate to $1.18 from $1.16 and our 1999 estimate to $1.50 from $1.45. Pricing pressure on the remote access side of the business has appeared to lessen. We believe Ascend's GBX 500 ATM switches continue to garner wins at the expense of its competitors. We are increasing our target price on Ascend to $55 per share, or 37X our new 1999 estimate. Our checks indicate the current quarter is on track to at least make the $0.28 estimate. New ATM and Frame Relay contracts are providing improved visibility, we believe. With easier second half revenue comparisons and improving operating margins, P/E expansion is likely. In our view, the shareholder base may change from value to momentum investors. >>> On May 19, 1998 UBS Securities issued the following: <<< Ascend Communications --- BUY Price: 44.25 Price Target: 50 Summary: Yesterday we wrote in a note that UUNet represented 20% of Ascend sales in 1Q98 as reported in its 10Q filing. This level seemed high given comments on the 1Q98 conference call, which suggested sales to UUNet were just north of 10%. Discussions with the company indicate that sales to the UUNet network were about 10%, which was the basis of the commentary on the conference call. An additional 10% of overall sales went to UUNet for wholesale applications where UUNet acts as a systems integrator. The purchase of equipment for wholesaling applications has been a trend for about two quarters. Business remains on track for Ascend. Maintain BUY with $50 target. . . . As mentioned in prior notes, we believe both the U.S. and International businesses will be up sequentially. We also currently estimate that RAC sales will be up around 2%, while Core Switching sales will be up around 14%. >>>>

To: Darren who wrote (47724)	5/29/1998 7:45:00 AM
From: gbh	Respond to of 61433

If ASND were priced in the current market relative to CSCO, it would trade at a share price of $36 1/2. That assumes that they will be a penny over earnings estimates as they have been over the last three quarters. Any downside surprise, and we all know what happens. Then why do think 40 will be cheap? The obvious answer (I'm not saying its the right one) to the CSCO question is that the street believes ASND will grow at a faster rate than CSCO, plus there is a built-in takeover premium (BTW I think this is gone now). But as far as growing faster than CSCO, this is not reflected in the current analyst estimates. These analyst have been burned before and aren't willing to publish the earnings estimate numbers that would justify the price. But the fact that the BUY ratings keeps coming in reflect that they believe management is playing the game conservatively now (unlike last year). Remember that these guys actually talk to management, some very often. When they stop being comfortable, we'll know it. Thats when you'll see <40. And thats when I feel you (and I) won't want the stock any more. Also you are correct about a down quarter. It would be death. But this is not unique to ASND. CSCO would face the same wrath. And this sandbagging can't last forever. Look for this quarter to exceed by more than 1 penny. It will have to to keep the price up. As far as exceeding CSCO growth, this will have to come from Core Switching. RAS/RAC will also be much healthier this quarter. And we may even be surprised by the SA line. Make no mistake about it, the internet buildout is moving ahead, and ASND is even better positioned than CSCO to take advantage of it. The carriers are spending and ASND is stronger than CSCO here. Re: 7.7% and Dillon Read; If the analysts/brokerages really thought the company was growing at 7%, it would already be a $20 stock, and Dillon Read maintains its BUY rating. They would be at HOLD or SELL if they really thought the potential was $45 in 12 months. They're hedging and gutless. :) Gary

To: Darren who wrote (47724)	5/29/1998 8:51:00 AM
From: michael modeme	Respond to of 61433

I don't understand your calculations, ASND has lower valuations (at least in terms of P/E and P/S) than CSCO. In which case ASND should be trading higher than it is conditional on it being priced relative to CSCO. I think you get around $52 for ASND given a CSCO valuation. So, considering that the growth rate of ASND is probably higher than CSCO, ASND looks pretty good. Cheers