Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Technology Stocks : Dell Technologies Inc. -- Ignore unavailable to you. Want to Upgrade?

To: Boplicity who wrote (77002)	11/7/1998 9:00:00 PM
From: Ed Forrest	Read Replies (1) \| Respond to of 176388

Hi Dell has gained 18% in one month,10-6 to 11-6.Thats not stagnation,thats getting off the deck and fighting back.How much does it have to gain before people stop worrying and start believing?Dell will make money for you no matter what your style of investing. Regards Ed Forrest

To: Boplicity who wrote (77002)	11/7/1998 9:05:00 PM
From: Chuzzlewit	Read Replies (1) \| Respond to of 176388

Greg, you raise an interesting question, and one that I think I discussed at length. But for the benefit of new people on this thread let me repeat some of what I previously posted. First, MD saw a ceiling of about 20-25% of market share, which he thought was obtainable in around five years. So, the question is what kind of growth does this imply. Market share figures are somewhat difficult to come up with because they include and exclude various geographic ares. But let's assume that Dell's current market share world-wide is 8%, and let us further assume that the market is expanding at 15% per annum. In five years. That means that in five years the market will be a little more than twice what it is today, and if Dell were to have 20% of that market, that implies that sales will quintuple over the next five years. That implies a growth rate of 38% per annum. If Dell achieved 25% market share that implies an annual growth rate of 44.3%. What happens after five years? The growth rate should equal the growth of the market. But there are some big buts in all of this. First, there is no reason to assume that Dell will content himself to simply selling computers. I have no doubt that he and his brain trust are trying to figure out how to make the Dell model extensible to other products. Second, the total market could expand at much greater than the 15% per annum figure I used above if new uses for PCs are created. Third, we already see Dell moving vigorously into mass storage, and I expect this trend to continue as he expands product offerings. Now, to the question of price appreciation. As you know, I have argued that the question of valuation is exceedingly difficult, and probably a waste of time. Instead, let's assume that DELL is properly priced, so the question is what kind of price appreciation could we expect in five years. My starting point is to assume that five years from now the stock will appreciate at approximately 15% per annum (which is the same as it's growth rate). Second, it is reasonable to assume that as Dell quintuples in sales, its relative valuation should increase because the company will not be perceived as a risky venture. The current P/E of the S&P500 is somewhere in the neighborhood of 24 with around 7 1/2% growth forecast. Let's assume that this number is skewed in two ways: first, growth of the S&P is projected to be considerably slower this coming year than it has been in the past, and second, there are a number of companies in the S&P that are about breakeven or losing money, and are thus trading on a basis of assumed intrinsic value rather than earnings. So after a lot of hand waving I will assume that the P/E excluding those weak sisters is around 20, and that forward growth estimates are around 12% per annum. This implies that the premium for growth is 167%. Applying this number to Dell yields a forward multiple of 25x earnings. Putting these ideas together I come up with the following: Dell is expected to earn around $1.45 next year. Applying four years of 38% growth gives $5.26, and then applying the 15% growth we have about 6.05 in eps. That yields a price of $151.19 per share five years hence, and that generates annual appreciation of 18% from current levels. Using 44.3% growth yields a target price of 178.25, or 22% over the next five years. The caveat in all of this is that it is probably safe to assume that things will change. Undoubtedly Dell will seek out new markets and new products, so I view these numbers as minimums rather than real forecasts. For example, these numbers looked only at PC sales, and did not include mass storage.

To: Boplicity who wrote (77002)	11/8/1998 10:07:00 AM
From: Mohan Marette	Read Replies (1) \| Respond to of 176388

DELL-Super Growth Stock. I see that you have latched on to that comment by Dell about the 25% market share in five years bit.Sure in absolute terms from 9.5% to 25% doesn't seem all that impressive but nothing could be farther from the truth.For one thing '25%-in-5-years' is a moving target since it is an ever expanding one and I believe to achieve 25% of this moving target in 5 years takes a tremendous amount of growth (or shall I say hyper-growth as they put it).Since I don't know what exactly the annual growth rate will be for the next 5 years I will leave it our collective imagination for the moment,besides I am not all that good with them numbers anyway. Paul and Craig have done some analysis I think I will go chew on that for a while.<g> Here is something interesting I found on Dell from Yahoo. messages.yahoo.com@m2.yahoo.com