What's it worth? An Overview of IT Companies
Glen is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
Hi, my name is Glen Bradford and I am pricing the S&P 500. At present I'm in the realm of IT companies. Oooh, my favorite! Let's do this.
360. Agilent Technologies (NYSE: A) is forecasting just under double digit growth. On $3.10 of earnings, I would say this is in the upper middle of fair valuation. Target: $37-$47. Agilent is now a dividend company, which according to analysts warrants higher price targets? That's funny. Anyway, the yield is less than 1%. Here's their latest presentation. I think that $50 in early 2011 put in a ceiling that will last a year or so on a forward basis. Thus, the upside is limited. Insiders gladly seem to sell around $50. Their payout ratio off the bat is really low so a few years down the road Agilent will likely attract the investors who seek dividend stalwarts.
361. Adobe Systems (NASDAQ: ADBE) is probably a company that you are familiar with due to Acrobat, Photoshop and CS. Acrobat is now indoctrinated into Corporate America and Photoshop is coming out with features that effectively further distort the lines between reality and edited photos to the point that I can't tell what is real from what isn't. Yes, there is competition but those who want the best choose Adobe Products. Adobe is trading at a forward P/E of around 13 a I think that this is appropriate for the stalwartness of this company and its products. Target: $28-$34.
362. Advanced Micro Devices (NYSE: AMD) goes by AMD according to the IT crowd that uses their chips. If you're looking to have the best of breed and pay top dollar, Intel is usually the processor of choice but AMD tends to beat on price and compatibility. Intel is presently trading at a 10% markup to AMD, and I think Intel is worth $28-$34. Unfortunately for AMD, I question their decision to stay out of the smart phone market. Target: $6.50-$8.50.
363. Altera (NASDAQ: ALTR) has over 20% of its market capitalization backed in cash and a small amount of long term debt. The easy math of backing out $3491M of cash across 320M shares means you're really looking at a stock $10.90 cheaper. So don't let the high P/E deter you. I'm glad they are paying a dividend, but the dividend is a joke for how small it is. Target: $37-$43. The fundamentals appear to be in the early stages of bottoming and so I expect 2013 to be stronger than 2012. I think that part of the new all time high prices from last year came from a little bit too much investor enthusiasm and the pullback in the latter half presented a buying opportunity for the patient. The present price is too steep for me to get involved because I like to enter at a discount to my intrinsic valuation.
Extra: Emmis Communications (NASDAQ: EMMS) is an asset play that was also brought to my attention by the investor who passed me TravelCenters of America. The CEO recently offered $2.40 to takeover the company. EMMS is now trading at $0.79. More recently, the company has succeeded in buying back preferred shares at $15.56. The deal has fallen apart in the past multiple times and people trying to arbitrage it have gotten burned. With a 52-week range topping at $1.34 and bottoming at $0.58, I'd say that at $0.79 there is serious upside to where the CEO tried to buy them out, over 200%. The risk here is low and the upside remains and the company has made progress escaping the death grip of the preferred shareholders. Target: $1.25-$1.75. Outperform.
That's all for now, email me your picks at globalspeculation at gmail.com.
Glen has no positions in any of the companies mentioned.