I can't believe it, but the evidence would seem to support the fact
that CNBC has the power to affect stocks. Given that fact you would
think they would exercise more objectivity, but apparently you
get more ratings when you make rather than report the news. Let's not
forget where they make their money.
Here's a slightly more educated opinion from CS First Boston.
10:11am EDT 7-May-99 CS First Boston (Kwatinetz, Michael (212) 325-0751) DELL
DELL: Dell Appears On Track To Beat Our Q1FY00 EPS Est. F
CREDIT SUISSE FIRST BOSTON CORPORATION
Equity Research Americas
U.S./Technology/PC Hardware
Michael Kwatinetz 1-212-325-0751 Michael.Kwatinetz@csfb.com
Hans Roderich 1-212-325-6181 Hans.Roderich@csfb.com
Jake Hindelong 1-212-325-6159 Jake.Hindelong@csfb.com
Peter Nurnberg 1-212-325-0054 Peter.Nurnberg@csfb.com
STRONG BUY
LARGE CAP
DELL COMPUTER (DELL)
Dell appears on track to beat our Q1 FY00 $0.15 EPS estimate
Summary
Dell appears on track to beat our Q1 FY00 $0.15 EPS estimate
Revenue appears to be tracking in line with our $5.4B forecast
, up 39%
Operating margin could exceed our 11.0% forecast
We wouldn't be surprised if Dell revealed progress on its
Beyond-the Box (BTB) initiatives
Maintain Dell Strong Buy rating
Price Target Mkt.Value 52-Week
05/06/991 (12mo.) Div. Yield (MM) Price Range
USD 39 7/16 na na !Zero Divide NA $55-20
Annual Prev. Abs. Rel. EV/ EBITDA/
EPS EPS P/E P/E EBITDA Share
1/00E $0.70 56.3 208% $0
1/99E 0.53 74.4 276%
1/98A 0.33 119.5 443%
April July Oct. Jan. FY End
2000E $0.15 $0.17 $0.19 $0.20 Jan.
1999E 0.11 0.12 0.14 0.15
1998A 0.07 0.07 0.09 0.10
ROIC (12/97)
Total Debt (12/97)
Book Value/Share (12/97)
WACC (12/97)
Debt/Total Capital (12/97)
Common Shares
EP Trend2
Est. 5-Yr. EPS Growth
Est. 5-Yr. Div. Growth
1On 05/06/99 DJIA closed at 10946 and S&P 500 at 1332.
2Economic profit trend.
Dell is the leading direct PC manufacturer.
Investment Summary
Dell appears on track to meet or beat our Q1 FY00 $0.15 EPS
estimate and consensus of $0.16. Upside is likely to be
driven by greater than forecast operating margin. Our FY00
estimate of $0.70 could be revised upward following the quarter.
Dell reports Q1 earnings Tuesday, May 18th, after the market
close.
Revenue appears to be tracking in-line with our $5.4B forecast
, up 39%. IBM, Gateway and Apple reported solid demand
growth in CQ1, and Microsoft indicated it was seeing robust
demand. Preliminary industry data suggesting Dell units were
up 50%+, in line with our forecast.
A positive mix shift toward notebooks, workstations and
servers could decrease the magnitude of Average Selling Price
(ASP) decline for Dell in Q1. Our Dell forecast is for a year
/year decline of 11% and a 1% decline sequentially.
Dell entered the sub-$1,000 market about half way through the
quarter (it announced products in March). While this could
effect ASPs in future quarters, we believe limited promotion
and the timing of the announcement make it unlikely to have
had a meaningful impact in Q1.
Our Q1 operating margin forecast of 11.0%, down 50 basis
points sequentially could prove conservative. In each of the
past two years, Q1 operating margins increased 30-40 basis
points sequentially as costs experienced scaling benefits.
Dell's escalating use of the web as a means of taking orders,
tracking orders, and supporting customers foreshadows further
productivity gains.
During the past few years, OpEx included aggressive
investments in international and IT infrastructure. With much
of this spending behind it, the company seems well-positioned
to achieve internal targets for lowering OpEx as a percent of
sales.
Dell is focusing on several major BTB opportunities:
financing a larger portion of corporate PCs, and some portion
of consumer PCs,
ramping its storage business,
increasing its services offerings,
developing a major business in peripherals, software and supplies
through its new Gigabuys website.
The company could announce progress on one or more of these
fronts during the conference call. (For further discussion of BTB
opportunities, see our newsletter, SoundBytes Issue 99.7, dated
April 27, 1999.) For example, Dell has begun offering linkage
between many of its 15,000 premier pages (customer web pages for
purchasing products) and GigaBuys. By offering an electronic
ordering mechanism, Dell can help customers streamline
purchasing, reducing their customer costs.
Dell is currently trading at 56 times forward consensus
estimates. As we move forward a quarter, this multiple will drop
due to growth plus the potential for modest estimate increases.
Dell is the leading direct PC manufacturer, is steadily
increasing its Internet sales and is managing its customer
relationships to develop additional revenue from BTB
opportunities. Along with other direct vendors like Gateway, we
believe Dell is best positioned to take advantage of these
opportunities. We maintain our Strong Buy rating.
N.B.: CREDIT SUISSE FIRST BOSTON CORPORATION may have, within the
last three years, served as a manager
or co-manager of a public offering of securities for or makes a
primary market in issues of any or all of the companies
mentioned.
CREDIT SUISSE FIRST BOSTON CORPORATION CREDIT SUISSE FIRST BOSTON CORPORATION
Analyst: Kwatinetz, M Telephone: (212) 325-0751 michael.kwatinetz@csfb.com
CREDIT SUISSE FIRST BOSTON CORPORATION CREDIT SUISSE FIRST BOSTON CORPORATION
Copyright 1999 CREDIT SUISSE FIRST BOSTON CORPORATION,
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= = DELL COMPUTER = = DELL: STRONG BUY
END OF NOTE
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