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Technology Stocks : Compaq -- Ignore unavailable to you. Want to Upgrade?

To: Elwood P. Dowd who wrote (38572)	12/4/1998 11:55:00 AM
From: Roads End	Read Replies (3) \| Respond to of 97611

EL...Mason should also comment on Digital. Confirmation DEC is contributing positively to earnings would cause analysts to revise estimates upward. My guess is current estimates do not include contributions from Digital. We'll see in a few minutes. Steve

To: Elwood P. Dowd who wrote (38572)	12/4/1998 11:57:00 AM
From: David E. Taylor	Read Replies (2) \| Respond to of 97611

Looks to me like the run up in CPQ over the last few days is simply the result of the market assigning a more "reasonable" valuation to CPQ based on projected forward earnings: 1999 EPS Share Price Forward P/E Growth (Estimated) (Current) (Est) IBM 7.49 168 22.4 14% DELL 1.45 66 45.0 31% CPQ 1.76 38 21.6 20% Assign an IBM P/E to CPQ's projected 1999 earnings, and you get about $39/share. Factor in the higher estimated growth rate and you get about $41-$42/share. That's about where we seem to be headed, as long as the general markets hold up. Further progress beyond the $39-$42 level would seem to depend on either: (1) Momentum investors blowing the price beyond the level supportable by the present earnings/growth projections, which could take us just temporarily to the $45-$50 range pretty quickly; or (2) The street's earnings estimates being revised upwards based on CPQ demonstrating through its Q4 1998 (and then Q1/Q2 1999) earnings that it is successfully using the DEC acquisition to eat into the IBM/HWP/SUNW enterprise market to sustain an earnings growth rate well in excess of the presently estimated 20%. If this happens, CPQ will settle onto a new base level at $45-$50 and move up from there. IMO, (1) is certainly possible, but in any event (2) will take place over the next couple of quarters. David T.