Netcom sees upward revision
Netcom (NETC) today had its ratings and recommendation increased by Salomon Brothers analyst Marc Usem, sending the stock up in morning trading.
Usem raised his recommendation to a "buy" from "hold." His earnings estimates were revised to a 1997 loss of $3.45 a share from $3.50, while the 1998 projections were narrowed to a loss of $2.15 a share from a loss of $2.30.
The Salomon analyst said his changes were based on the "cheap" price of the stock and that it is trading at a discount in comparison to the company's competitors.
Usem also added: "At such a low value, it's a take-out or acquisition candidate. It's not that I think that this is something that imminent, but a local exchange carrier, [regional telephone company], or foreign telco looking for a way to get into the United States [market] might find it attractive." He said that he believes the stock is worth 12. Netcom shares traded as high as 18.5 percent today to 10, up from its close of 8-7/16 yesterday.
Niles also raised his 1997 estimates to $1.23 a share from $1. His 1998 revised estimate is now $3.75 from $2.60.
"The revenue, operating margins, and EPS reported yesterday were higher than our expectations," he said, noting the upward revision was being driven by a return to profitability.
The company also announced that all AMD divisions posted strong sequential growth and that the overall book-to-bill ratio exceeded 1:1. (A 1:1 ratio means that for every $100 in new orders a similar amount is shipped.)
Niles projects shipments of 3.3 million K6 multimedia units in fiscal 1997 and 14 million the following year.
Tenney's 1998 rating was also increased to $4.68 a share from $4.09.
"In our opinion, Seagate remains the strongest positioned public disk drive company, with significant synergies in its vertical integration and cost structure," he said.
The analyst maintained his "long-term attractive" rating on the company.