Tech Industry

ANALYST WATCH: PC stocks in the fish bowl

PC stocks were a hot topic among leading analysts this week. Heading into the traditionally slower spring and summer months, investors might want to juggle their portfolios ahead of the expected run-up this fall.

On Friday, Bear Stearns fired the first warning shot, cutting Gateway Inc. (NYSE: GTW) sales and earnings forecasts after meeting with management.



PC stocks: Ready to run?



Analyst Andrew Neff said the company could miss sales expectations in the first quarter by as much as $100 million to $150 million. Most analysts are expecting sales of $2.45 billion.

In a research note, Neff said that while Gateway is still comfortable with its guidance of first-quarter earnings of 41 cents a share, the risk of missing that figure has increased.

He cut his first-quarter earnings estimate to 39 cents a share from 40 cents, and cut his second-quarter estimate to 34 cents from 35 cents. He maintains a "buy" rating on the stock.

Gateway shares were trading around $57 a share Friday.

The stock fell to a low of 23 3/8 last March before surging to a high of 84 in November.

Twenty-three of the 25 analysts watching the stock maintain either a "buy" or "strong buy" rating on Gateway.

Earlier this week, Neff raised his rating on Dell Computer Corp. (Nasdaq: DELL) to a "buy" rating from "attractive" and bumped its 12-month price target to $70 to $80 a share from $55 to $65 a share.

Banc of America analyst Kurt King raised Dell to a "strong buy" from a "buy" and lifted its price target from $52 a share to $72 a share.

Dell shares were within a buck of its 52-week high Friday, perched at around $56 a share.

"With estimates lower and the current quarter looking solid, Dell looks ready to get back on its old path of consistently meeting or beating estimates and periodically generating estimate increases," King said in a research note.

First Call consensus expects Dell to earn 16 cents a share in its first quarter and 90 cents a share in the fiscal year.

Thirty of the 34 analysts tracking the stock call it either a "buy" or "strong buy."

While Apple Computer Inc. (Nasdaq: AAPL) continues to trade in the stratosphere, some analysts are finding value in Compaq Computer Corp. (NYSE: CPQ). After a management shakeup, complications from its merger with DEC and slumping corporate sales, Compaq appears to be on the road to recovery.

Its shares moved above $30 a share Friday, an impressive accomplishment of late considering its shares were stuck at $18 a share in October.

This week, Donaldson Lufkin & Jenrette analyst Thomas Galvin added Compaq to the company's "value list."

BofA's King upgraded it from a "buy" to a "strong buy" and raised its price target from $40 a share to $45.

King said Compaq could move as high as $50 to $60 a share if management delivers on its long-term growth and margin targets.

"We'd look through the current quarter and buy now," King said in a research note. "The positive outlook for the longer-term isn't likely to change because of first-quarter results."

First Call consensus expects Compaq to earn 16 cents a share in the first quarter and $1.07 a share in the fiscal year.