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Street Talk: Dell, Intel
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November 10, 2000: 10:34 a.m. ET
Analysts split on Disney; cut gaming stocks; raise Nextel; boost beverages
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NEW YORK (CNNfn) - Wall Street wizards had few good things to say about Dell Computer a day after the company told investors future revenues won't live up to expectations. Analysts also had mixed feelings about Intel and other semiconductor stocks.
Bear Stearns reiterated its "neutral rating" on Dell (DELL: Research, Estimates) after the No. 2 personal computer maker posted quarterly earnings that matched forecasts, but said revenue growth next year would be below historical rates.
Dell said revenue should grow 20 percent in fiscal 2002 -- below Bear's forecast of 21 percent.
"Investors may be disappointed by Dell's results due to three factors," Bear said in a research note. "The company achieved in-line EPS with the help of interest, other income. It gave a low growth goal for fiscal 2002, and we are seeing aggressive pricing trends, which could accelerate going forward."
Credit Suisse First Boston said it is reiterating its "hold" rating on Dell, but lowered its earnings per share estimates.
CSFB cut Dell's 2002 EPS estimate to $1.08 from $1.10 and its 2003 EPS estimate to $1.25 from $1.30. He also cut the stock's six- to 12-month price target to $25 from $33.
"Dell needs to quickly decrease its reliance on desktop revenues, currently 48 percent of total sales, and establish a presence as an enterprise supplier, currently 19 percent of total sales," CSFB said. "A successful transition will take time and money and could lead to further revenue and earnings shortfalls."
Dell will "succeed," according to CSFB, but "investors would be wise to wait this one out."
SG Cowen reiterated its "buy" rating on Dell, although it cut its 2001 earnings estimate to 92 cents a share from 93 cents and its 2002 estimate to $1.10 from $1.15.
Prudential cut its price target for Dell to $34 from $43.
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Morgan Stanley cut its rating on Dell to "neutral" from "outperform" and lowered its estimates of the company's earnings.
Analyst Gillian Munson cut the computer maker's estimated 2002 earnings per share to $1.07 from $1.10.
"This is below Dell's guidance because we worry that Dell is underfunding its enterprise effort," Munson said in a research note.
On Thursday, Dell set its fiscal 2002 revenue growth target at 20 percent, lower than its historical growth rates of higher than 50 percent, which made it the top performing S&P stock through the 1990s.
"After falling short of targets or revising guidance in four of the last five quarters, we think it will take time to regain investor confidence," Munson said.
UBS Warburg reiterated its "strong buy" rating on Dell.
"While Dell may be under pressure on short-term earnings guidance, we believe the company has a more attractive long-term strategy that can generate 25-percent-plus earnings growth," Warburg analyst Don Young said in a note.
Mixed chips
Morgan Stanley Dean Witter analyst Mark L. Edelstone cut his investment recommendation on Intel (INTC: Research, Estimates), the world's largest chipmaker, to "neutral" from "outperform," citing weak PC demand.
He also trimmed his 2000 earning per Intel share projection to $1.68 from $1.70 and his 2001 EPS estimate to $1.65 from $1.75.
"Available data indicates overall PC demand remained sluggish in October," Edelstone said. Although "notebook and server demand remain strong, we believe DT PC demand, particularly corporate, remains weak."
UBS Warburg's Don Young reiterated his "buy" ratings on Intel and chip maker Advanced Micro Devices (AMD: Research, Estimates) and its "hold" rating on another semiconductor stock, Micron Technology (MU: Research, Estimates).
Bear Stearns reiterated its "buy" rating on two other chip makers, Altera (ALTR: Research, Estimates) and Cypress Semiconductor (CY: Research, Estimates). It also reiterated its "attractive" rating on LSI Logic (LSI: Research, Estimates).
Disney
Deutsche Banc Alex. Brown downgraded Walt Disney (DIS: Research, Estimates) to "market perform" from "buy" after the company reported earnings that beat Wall Street estimates, but raised concerns about future earnings.
Goldman Sachs cut its 2001 earnings estimate for Disney to $1 from $1.05
Bear Stearns reiterated its "attractive" rating on Disney, saying, "We think Disney presents an attractive risk/reward opportunity, the greatest risk being dead money for the next six months, barring any further downward revisions."
SG Cowen reiterated its "buy" rating on Disney, though it acknowledged a "softer outlook" for the company.
UBS Warburg, on the other hand, reiterated its "strong buy" rating on Disney.
And CSFB upgraded Disney to "strong buy" from "buy" and reiterated its price target of $50.
Disney closed Thursday at $31.13.
Oracle, gambling and Nextel
Lehman Brothers reiterated a "buy" rating on the world's second-largest software company, Oracle (ORCL: Research, Estimates), on strong growth in Oracle's application license revenues.
Lehman said it projected 60 percent growth in Oracle's applications license revenue for this quarter and more than 50 percent growth for fiscal 2001.
Lehman analysts also said they view continued weakness in Oracle shares as a good buying opportunity.
"The stock is now trading at 42 times next year's earnings estimates, a huge discount to where it has traded over the last six months," said Neil Herman, Lehman analyst, in research notes.
UBS Warburg analyst Robin Farley downgraded two gaming stocks, MGM Mirage (MGG: Research, Estimates) and Harrah's (HET: Research, Estimates), to "hold" from "buy,"saying Las Vegas strip gaming revenue declined for the month of September, the first decrease since 1998.
WR Hambrecht reiterated its "buy" rating on wireless company Nextel Communications (NXTL: Research, Estimates) after the Federal Communications Commission made more airwaves available for commercial use, part of the spectrum previously limited to private entities. Hambrecht kept its $85 price target on Nextel shares, which closed Thursday at $31.
Bear Stearns agreed with Hambrecht, reiterating its "attractive" rating on Nextel shares.
Imbibing beverages
Merrill Lynch said it was raising share price targets on beverage firms beverage makers Coca-Cola (KO: Research, Estimates), Pepsico (PEP: Research, Estimates) and Anheuser-Busch (BUD: Research, Estimates) due to favorable industry
trends.
Merrill Lynch raised the price target on Coca-Cola, a Dow Jones industrial average component and the world's largest soft drink maker, to $78 from $75. Coca-Cola shares closed at $62.31 Thursday.
PepsiCo, which makes Pepsi Cola, Mountain Dew and Frito Lay snacks, closed at $49 on Thursday. Merrill Lynch raised PepsiCo's price target to $60 from $55.
Merrill Lynch raised its price target on Anheuser-Busch to $52 from $46. The stock closed at $46.25.
Merrill Lynch said in a research note that earnings per share for the large beverage companies were going to rise about 15 percent in 2001, compared with 10 percent for the broader market.
Merrill Lynch said it would recommend Coca-Cola the most of the stocks in the beverage category.
Viacom
Merrill Lynch reiterated its "buy" rating on Viacom (VIA: Research, Estimates), owner of the popular MTV music network, and maintained its 12- to 18-month target price of $100, saying it believes the firm will weather an advertising slowdown better than others in the sector.
"Viacom will, in our view, benefit from substantial consolidator economics over the next 12 to 18 months and a larger component of more-recession-resistant local advertising, as opposed to national advertising," Merrill Lynch said in a report.
Merrill Lynch projected that the newly combined company of Viacom and CBS will help boost Viacom's free cash flow.
Asia Global Crossing
Goldman Sachs initiated coverage of pan-Asian telecommunications company Asia Global Crossing (AGCX\: Research, Estimates), putting it on its "recommended" list.
 Merrill Lynch also initiated coverage of Asia Global Crossing, giving it intermediate and long term "buy" ratings.
Merrill also set a price target of $17 on the shares.
"We believe Asia Global Crossing is well positioned to become the first truly pan-Asian network services provider," Merrill said in a research note. 
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