Many tech stocks have been slammed down in the general market thrashing that’s taken place. In the latest bloodletting just prior to the Fed rate cut, all sectors have been hit; the good with the bad have been thrown down. One such name, Tellabs, Inc. (NYSE: TLAB), has had a rough year, falling from a high of more than $13 per share down to a year-low of $5, recently trading at around $6. This is more than a 100% drop for the telecommunications equipment maker and provider. It earned only 1 cent per share earnings this quarter compared to 7 cents last quarter, or $6.3 million down from $29.1 million. Revenue, however, increased to $469 million from $454 million.
The stock has been trading recently more like a homebuilding stock, as it flirts with its five-year low. Wall Street’s negativity on the stock is primarily due to a sluggish sales growth outlook for 2008, while the company searches for a new CEO and foresees some layoffs in a streamlining move. Earnings growth is expected to pick up in the fourth quarter of 2008 for the equipment communications gear provider. So, some value and momentum players may look at Tellabs, if there is any carry-through on the post-Fed cut rate rallies.
A huge name with a huge stock price, Google (NASDAQ: GOOG) is much more visible than Tellabs, yet oddly almost overlooked due to the recent market carnage. With a stock price in the mid-500s, technology investors will not be frightened by this as they realize this is a 25% break from the top of 747, a potential bargain for one of the leaders in the tech sector. Despite some questioning the solidity of their earnings and their ability to sustain their current robust earnings growth rate, even conservative estimates make for eye-popping growth for investors, again either growth and value investors or growth/momentum/technical analysis investors. The consensus estimates project a whopping $19 share for the coming year, up from $14 a share. Even trimming these estimates from their 35% annual income growth level to a more conservative 25%, you can see why paying for growth and value in Google may be worthwhile.
A less spectacular but potentially worthwhile tech stock is computer maker Hewlett-Packard, Inc. (NYSE: HPQ). With 13-15% annual growth projected in the next two years, trading in the mid-40s, right around the mid-range of its last twelve-month’s share prices, and 25% off its twelve-month high price, it may merit another look despite inhabiting the dull commoditized computer box maker space. It is performing better than its rival Dell, which still hasn’t figured out the right combination of moves to get the company going again.
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