Could someone address this prediction jan 25?
On MSFT thread Jan 25 Jake0302 posted this long excerpt from an optioninvestor newsletter. I'm curious what has changed so radically in 3 weeks according to analysts? Here's the excerpt:
I follow an optioninvestor newsletter, which I highly recommend (www.optioninvestor.com... there's the plug... you can get a free 2 wk trial, which is great). Here is their take on DELL, which is a current pick.
DELL - Dell Computer $83.00
Dell is the largest direct sales PC manufacturer in the
world, listed at 125th in the Fortune-500 and 343rd in the
Global-500 of top companies, with $16.8 billion in sales
over the last 4 quarters. Dell has consistently
outperformed any other major stock for price performance.
Dell is up +1200% in the last five years and has split
their stock five times in the last three years, two times
in 1998 alone. Dell is a low price, high margin producer
because it has only 6 days of inventory and doesn't have to
pay its suppliers (some who manufacture in Asia) until 8
days later. Since Dell gets paid before it manufactures a
box, they have a huge cash float-can you say "83% return on
equity?" In late December, they announced a multi-year
marketing deal with AOL to place AOL on all Dell desktops.
In its server business, Dell managed a 62% year over year
sequential revenue growth. With over 200 product and
service awards earned during 1998, Dell has not forgotten
its manufacturing and marketing prowess
Veteran readers may recall our obituary to DELL written in
October. For those who missed it, "It is not often we have
to write an obituary for a great play but for those of us
still in denial, Dell may be dead. We still think Dell is
a great company. Great earnings, great sales, growing at
+50%, opening new markets. We think the problems are
many." We assumed that the shares in float, now totaling
about 980 million (that's "m", not "b"), had split so many
times, so as to dilute the stock's ability to have big
daily run-ups or even bigger earnings per share surprises.
We reasoned it now takes an additional $10 million of
earnings to create $.01 per share surprise. Dell used to
surprise us by $.05 routinelypretty hard now to hide $50
million quarterly from Wall Street, especially for an
earnings surprise. In essence, Dell's ratio of daily
turnover compared to shares in float couldn't move the
price as much. To add insult to injury, Dell really
flattened out after its last split run to $69, where it
fell back to languish in the $60-$66 range. In early
November, DELL spiked up to $72 in anticipation of another
earnings surprise but couldn't hold it after the
announcement. So we dropped it despite its sound
fundamentals. Now, Dell's back.
>From their 10Q filed with the SEC December 14th, we glean
the following: During the third quarter and first nine
months of fiscal 1999, enterprise unit sales increased 112%
and 165%, respectively, compared to the third quarter and
first nine months of fiscal 1998, and increased
sequentially 13% over the second quarter of fiscal 1999.
Notebook unit sales increased 141% and 123% in the third
quarter and first nine months of fiscal 1999, compared to
the same period of the prior fiscal year, and increased
sequentially 16% over the second quarter of fiscal 1999.
Net revenue increased in all geographic regions in the
third quarter and the first nine months of fiscal 1999 as
compared to the same periods of fiscal 1998. Net revenue
for the third quarter of fiscal 1999 compared to the third
quarter of fiscal 1998 increased 46% in the Americas, 68%
in Europe and 49% in Asia-Pacific and Japan. Net revenue
for the first nine months of fiscal 1999 compared to the
first nine months of fiscal 1998 increased 48% in the
Americas,67% in Europe and 39% in Asia-Pacific and Japan.
Nowadays, this stuff barely makes the news. We think their
price would be higher if it did.
Wednesday, Dell's volume swelled to over 27 million shares,
well above its 19 million share average, raising the price
$2.19 to an all-time closing high of $85.31. If Dell can
break this, its next resistance is $88.13, set in Wednesday
intra-day trading. Thursday and Friday, Dell fared much
better than the overall NASDAQ giving back only $2.31 on
lower than average volumes. This shows investor
unwillingness to part with the stock, though we could sure
use more high volume trading days. As evidenced by Dell's
tie for the #1 position in PCs and workstations, we can
only offer an educated guess that Dell contributed
significantly to Microsoft's stellar earnings. What's good
for the goose is good for the gander, and we expect this to
be well-reflected in Dell's earnings too. Heck, Gateway
impressed the market with upside surprise earnings. So will
Dell as news of Dell's success's get more notice running
into earnings, scheduled Tues., February 16, after the
close.
It is not likely you'll hear this from the Wall Street
Journal, Baron's or CNBC. So we'll spread the word. While
Hewlett Packard still rules the NT space, price deflation
is favoring direct seller Dell, which claimed 20% of the NT
market in the September period, nearly double its previous
share (motley Fool). Hewlett-Packard and Dell, which had
zero market share in the beginning of 1997, are in a
virtual tie for first place in both units and revenue for
the personal workstation segment (Reuters). That knocked
Compaq out of the number two slot, as its market share
plunged from 34% to 17% (Motley Fool). Dell will integrate
@Home's broadband Internet service experience with cable-
ready and Dell Dimension desktop PCs (PRNewswire). Dell
will be the first major computer vendor to offer the
multiple award-winning Digital Flat Panel Solution Pack
from Number Nine Visual Technology. Thursday, they
announced ImageWatch(SM), a program that provides early
notification of technology changes to Dell corporate and
institutional customers, available at no charge.
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