Stock of the Week for February 8, 1999
--------------------------------------------------------------------------------
Please read the Disclaimer Notice at the bottom of the page.
--------------------------------------------------------------------------------
What is the Stock of the Week? Each week we feature one stock that we believe has the potential to appreciate more than 10%. We search our databases, using complex mathematical relationships, to make our selections. Some of our previous choices are listed in the Performance Record and Previous Picks sections of our site. Feel free to visit those pages.
What is this Week's Selection? This week we are featuring one of the premier high tech companies. Dell Computers designs, develops, manufactures, markets, services and supports a range of computer systems, including desktop, notebooks, & enterprise systems (includes servers and workstations). It trades on the Nasdaq under the symbol DELL.
Business Summary: Dell Computer Corporation (DELL) is one of the world's top PC Makers and the world's #1 direct-sale computer vendor. Led by founder Michael Dell (the longest-tenured CEO of any major US computer company), who owns 16% of his creation, the company sells hardware and markets third-party software and peripherals. Products include Latitude notebook computers, Dimension and OptiPlex desktop PCs, and PowerEdge servers. Dell's third-party products include CD-ROM drives, modems, monitors, networking hardware, memory cards, storage devices, printers, and speakers. More than 90% of its systems are sold to businesses and government entities.
Fundamentals: The company has an earning of $0.93 per share (P/E of 106); Net Profit Margin of 7.9% and Return on Equity of 88.35%. Earnings growth rate is the real story with this company. The company in the past 5 years has had a 68.4% earnings growth. Forecasts for earnings growth for this year are 65.1% while estimates for next year are 38.9%. For comparison purposes, S&P 500 companies have an average P/E of 28.3. It trades at an average daily volume of 17.1 million shares with a market capitalization of $127.8 billion. The company is in the Computer Hardware Sector according to the S&P. It is ranked 5 out of 8 companies in the sector, according to the analysts' rankings. The companies in this sector have an average PE of -2471. There are 1.27 billion shares outstanding with a float of 979.6 million. Short Interest (as of December 8) on the stock is 28.0 million (1.42%). Average price of the stock (50-days) is $76.70 while the 200-day average price on the stock is $59.02. Stock has a 52-week trading range of $25 1/4 (2/2/98) to $110 (2/2/99). It last traded at $100 7/16.
Dell Computer Corporation (DELL) employs 16,000 people and is headquartered in Roundrock, Texas. Director of Investor Relations could be reached at (512) 338-4400. To see the latest research report on the company, Click Here. A total of 31 brokerage houses follow the stock. There are 12 Strong Buys, 9 Moderate Buys, and 10 Holds on the stock. Click Here to see the company's Latest Quarterly Report for the quarter ending December 14, 1998. For the company's latest Annual Report, please Click Here. To view the latest Balance Sheet on the stock, Click Here.
There are 1,136 institutions listed as stock holders owning 50.77 % of the shares. Mutual Funds had a net sale of 8.45 million shares in the past 3 months.
Special Notes
To us, the NASDAQ market has seen a large sell off (5% in the past week). A technical rebound is expected. The price of Dell shares has traditionally run up prior to its earnings release date. The earnings for the past quarter are due on February 16th after the close of business. We expect great numbers from the company. The said rebound in conjunction with the earnings release date should help to push the share price higher. Historically speaking, Dell has split its stock 2 for 1 in the price range $105-$115. Last year, there were two such splits, one in February, and one in August. Well, we are in February! The company has an adequate number of authorized shares to announce a split without the shareholders approval. In the past, the splits have been announced concurrent with the earnings release. Even if a split is not announced, this is a blue chip stock has consistently outperformed the market and should be part of any long term portfolio.
Technical Discussion:
The stock last traded at $100 7/16, down 1 15/16. The Computer Hardware Index, along with the Advanced/Decline Line for the sector, is illustrated in Figure 1. The two year price chart on the stock, with the 200-day MA, is shown as Figure 2. Note the split history on this chart. The Commodity Channel Index (Figure 3), the MACD (Figure 4), Stochastic (Figure 5) and the Wilder Relative Strength (Figure 6) are also in bullish phases. For a discussion of technical terms, refer to our Technical Analysis Section.
The stock last traded at $100 7/16. Our one month target is $112. Our Stop/Loss is $90. The long term (one year) target is $200. Please note that we expect another choppy week of trading for the Nasdaq. However, any upday in the Nasdaq market, means added strength in shares of Dell. Any pull back is seen as a buying opportunity. Please note that we have set a liberal stop loss for this stock. We will not panic on this stock if softness is seen. Instead, we will use the softness to add to our position. If you add this stock to your portfolio early part of the week, please preserve some of your buying power in case we see buying opportunity latter part of the week.
--------------------------------------------------------------------------------
Figure 1: One year price chart for the Computer Index, with A/D line (blue line) and High/Low (red).
--------------------------------------------------------------------------------
Figure 2: Two Year Price and Volume chart with the 200-day MA plotted.
--------------------------------------------------------------------------------
Figure 3: One Year Price Chart with CCI plotted
--------------------------------------------------------------------------------
Figure 4: One Year Price Chart with MACD plotted.
--------------------------------------------------------------------------------
Figure 5: One Year Price Chart with Stochastic Shown.
--------------------------------------------------------------------------------
Figure 6: One Year Price Chart with Wilder Relative Strength.
--------------------------------------------------------------------------------
OPTIONS
Options are traded on this stock. Remember options represent high risk investments. You could lose all of your money fast. Please exercise reasonable caution!
Option Strike Price Price (Premium) Symbol Latest Price
Mar 100 Calls $100 $11 5/8 DLQ CT
Click Here
Mar 105 Calls $105 $5 3/4 DLQ CA
Click Here
May 120 Calls $120 $9 1/8 DLQ ED
Click Here
Jan 2000; 130 Calls $130 $18 1/2 LDE AF
Click Here
--------------------------------------------------------------------------------
NOTICE:
The recommendations and information provided here should not be interpreted as investment advice, or as an endorsement of any security. Remarks and data are for informational purposes only and are provided without warranty of any kind. The trading of securities may not be suitable for all potential users of this information. You, not STOCKWINNERS.COM, assume the entire cost and risk of any investing and/or trading you choose to undertake. Remember, past performance does not insure future results.
|
