Sunday, March 11, 2012

Best Wall St. Stocks Today: PAR,DELL,HPQ,CSCO

3PAR, Inc. (NYSE: PAR) went from a boring technology stock to a hot technology stock.� If reports are accurate, It ma get even hotter as the rival bids keep trumping each other.

CNBC has reported that Dell Inc. (NASDAQ: DELL) is on the verge of issuing a rival bid that would trump the higher counterbid from Hewlett-Packard Co. (NYSE: HPQ).� Dell started at $18.00 per share, and that was deemed to be overpaying by many market pundits.� Then H-P went with a $24.00 bid to rival Dell.� What the new bd for 3PAR will be is hard to say, but the market has decided that it is roughly $27.00 because shares rallied from $26.60 to $27.49 before coming back down to $27.00 now.

3PAR cannot be compared on its own to what the sales and earnings might be if it was a unit of one of these much larger destinations in technology.� Whatever that value is, it better be multiples of what the stock value was on its own.� 3PAR earnings estimates are $0.15 EPS for Fiscal March-2011 and $0.27 EPS for March-2012.� The 2011 and 2012 revenue estimates are $235.3 million and $278.3 million, respectively.� At this rate, the forward P/E ratios on a standalone basis are 180 for next year and 100 for 2012.� The market cap of almost $1.7 billion generates multiples on revenues of 7.2 for 2011 and 6.1 for 2012.

At what point this becomes too expensive of a company depends upon who the buyer is.� Now that Cisco Systems Inc. (NASDAQ: CSCO) has adopted the Pac Man model of gobbling up every aspect of the communications space and now the data center space, companies like H-P and Dell have to adapt.� It also means they may have to pay more for a business than it is worth on the surface or more than what the business is worth on a standalone basis.� Beauty is in the eye of the beholder.


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