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 : All About Sun Microsystems -- Ignore unavailable to you. Want to Upgrade?

To: Howard Bennett who wrote (13521)	1/17/1999 2:41:00 PM
From: Neil Kalton	Read Replies (1) \| Respond to of 64865

Howard, I wouldn't rely too much on the analyst's estimates. This year's estimates of $2.75-2.80 is probably about right, however, FY00 is anyone's guess. The analysts have not yet taken into account any potential additional growth from the NSCP/AOL deal, the announcement this week concerning servers, etc. aimed at the telecom market, and I believe the analyst's views regarding Asia are still on the cautionary, conservative side. In sum, the current estimate of $3.32 for FY00 reveal a "wait-and-see" attitude and is on, if anything, the conservative side. After a couple of years of moderately declining growth due to the Asian flu do not be surprised to see growth accelerate over the next couple of years to the 25-30% range (IMHO, this is what SUNW's recent stock rise is telling us). A 25-30% growth rate sees EPS in the $3.50-3.60 range for FY00 and the $4.40-4.50 range for FY01. What multiples would you be willing to pay for this type of growth? For example if SUNW does earn $4.50 in FY01 then a stock price of $150 yields a PE of 33; not too unreasonable IMO. What PE is reasonable? This is a very theoretical discussion but certainly with the market multiple at 25-28X earnings one can make a strong argument that SUNW with its 18-25% LT growth rate deserves a considerable premium to the market. Now one could also make the argument that the entire market is overvalued ... but I strongly believe forecasting market moves and valuations is a near impossibility that will make you a fool more times than not. Anyway, I've been holding SUNW for over three years and see no compelling reasons to sell SUNW yet. The stock will go up and it will go down but the long term upward trend remains decidedly intact. -nk