INFORMATION
TECHNOLOGY
FIN 724/824 – Stock Market Class
Ronald Jewsikow
Daniel Kujawa
Steven Muszynski
Weston Conway
Maria Malguarnera
AGENDA
• Overview of Stocks under consideration
• Intel
• Apple
• Oracle
• Hewlett Packard
• Corning
• MasterCard
• Google
• Cisco
• Recommendations
• Options
INTEL
Intel Inc.
Price
$21.86
Price Target
$30.00
Upside/Downside
42.1%
Current P/E
10.67
INTEL
• Upside
• Last earnings report was the best ever
• Have large market share of computer chip market
• Consumer spending is rising which is correlated to computer sales
• Downside
• Have large market share – it is unclear how they can gain more
revenues
• Computer sales may be giving way to tablet sales which do not
have Intel chips
• Recommendation - Hold
APPLE
Apple Inc.
Price
$348.16
Price Target
$441.43
Upside/Downside
26.8%
Current P/E
19.43
APPLE
• Upside – New product launches including iPhone, iPad,
and Macbook Pro Line
• Downside – Steve Jobs health, ability to continue to
innovate, sustainable growth
• Recommendation - Hold
ORACLE
Oracle
Price
$32.90
Price Target
$37.63
Upside/Downside
14.4%
Current P/E
24.7
ORACLE
• Upside – New Hardware business segment growth
potential thanks to acquisition of Sun Microsystems.
• Downside – Immense growth in stock price already. Need
to perform significant growth in order to warrant high stock
valuation
• Recommendation – Reduce current 500BP position to
250BP
HEWLETT PACKARD
Hewlett Packard
Price
$43.63
Price Target
$66.15
Upside/Downside
51.62%
Current P/E
11.09
HEWLETT PACKARD
• Upside
• Strong brand recognition
• Good acquisition decisions
• Large market share of printer and computer accessory business
• Downside
• Desktop computer sales are falling in America
• Tablets and new substitutes are cutting into computer sales
• Recommendation – hold
CORNING
Corning Inc.
Current Price
22.60
Target Price
28.17
Upside/Downside
24.6%
Current P/E
10.04
CORNING
• Upside- A “sexy” stock, Lots of growth potential, High
sales, Exciting new product line
• Downside- Lot of emphasis on Display Technology, Lot of
their products are in expensive merchandise
• Recommendation-Hold
MASTERCARD
MasterCard Inc
Price
$242
Price Target
$290
Upside/Downside
19.8%
Current P/E
17.2
MASTERCARD
•
•
•
•
•
Large trend of paper currency to plastic around the
world
DCF value of 317 (10.5,4.5)
Debit card fee caps are overblown
Fears of government spending cuts, margin
compression
Lower Price to earnings multiple than historical due to
lower growth and increased competition
GOOGLE
Corning Inc.
Current Price
613.40
Target Price
811.16
Upside/Downside
31.96%
Current P/E
23.32
GOOGLE
• Upside
• Most popular search engine
• New products everyday
• Adwords and Adsense
• Downside
• Not as focused as it could be – many products on the
internet.
• Facebook is the most visited website
• is visited 6 times more than Google
CISCO
• Current EV/EBITDA at 5.9 10 year low
• EV per share is $14.4 also a 10 year low
• Some of this is warranted given execution and
spending concerns
CISCO
• Strong balance sheet, 25 billion in cash net of
debt
• Bullish cross on the Stochastics
• Conservative EPS estimate (given poor
performance) of $1.50 analysts are at $1.59 for
this year and $1.76 for next
• Cisco historically has strong share repurchase
programs
CISCO - TARGET
• Enterprise value of $14.40 a share ( 5 year low)
• 12 Multiple on our $1.50 (peg=1.2)=18
• Plus there net cash position of $4.24 per share=
22.24
• EV to EBITDA ( between current all time low and
median) =$19.52+$4.24=$23.76
• Target price of $23
RECOMMENDATIONS
CURRENT
WEIGHT (bp)
CURRENT
PRICE
TARGET
PRICE
UPSIDE
RECOMMENDATION
Hewlett
Packard
398
43.63
66.15
51.6%
HOLD
Intel
407
21.86
30.00
42.1%
HOLD
Google
-
613.40
811.16
32.96%
BUY
Apple
461
348.16
441.43
26.8%
HOLD
Corning
388
22.60
28.17
24.6%
HOLD
Cisco
-
18.56
23.00
23.92%
BUY
MasterCard
-
290.00
242.00
19.8%
BUY
Oracle
496
32.90
37.63
14.4%
SELL 250 BP
OPTIONS
• Add 100 Basis points from Industrials
• Class gave 100 bps
• Sell 250 Oracle bps
• Total 450 more bps
• Option 1
• Buy 225 bps MasterCard
• Buy 225 bps Google
• Option 2
• Buy 225 bps MasterCard
• Buy 225 bps Cisco
• Option 3
• Buy 225 bps Google
• Buy 225 bps Cisco