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

To: hdl who wrote (96606)	2/9/1999 10:17:00 PM
From: Chuzzlewit	Read Replies (1) \| Respond to of 176387

Well, like they say, memory is the second thing to go. But if you think about it for a moment, before the momentum induced run-up of late last summer Dell was trading around $60. It spiked to $73 at earnings time and slipped down after that. But now, six months later it traded as high as $110. That would come to a 236% annualized increase in share price -- far faster than the increase in earnings would justify. So that means that there are only a few logical explanations: 1. Dell was significantly under-priced last August -- doubtful considering the intense analyst scrutiny the company was under; 2. There is a generalized increase in multiples due to a decrease in long term interest rates -- again, the facts don't support this; 3. Investors perceive a substantial increase in the growth rate of the stock -- although some increase in growth is likely as Dell has proven itself a formidable competitor in servers, and a promising seller of mass storage, this explanation is unlikely because the increases due to those factors are not large enough to explain the price appreciation; 4. A speculative bubble in a number of stocks has emerged. This may take the form of a flight to quality, or momentum investing, but clearly, there is no discernable relationship between the rapid increases in share prices and increases in cash flow. This is the explanation that has my vote. So where do I think Dell might settle if all the speculative excess were squeezed out? Around $65 - $70. That probably won't happen because Dell is still a momentum player's toy. TTFN, CTC