Friday, November 10, 2006

Calls of Note Part 2

- Goldman Sachs is somewhat cautious on Lexmark (NYSE:LXK) after an as-expected analysts' meeting.

Although Lexmark is still very much a work-in-process, LXK shares have risen aggressively, up 47% year-to-date, versus 24% for the hardware group and the S&P's 10%. Despite this, the firm hesitates to take a more negative view on the stock due to support from its low share count (at only 98 million shares), many of which are tightly held by investors, and high short interest position (at nearly 10% of shares outstanding). On the other hand, they believe that in order for the stock to maintain its upwards momentum, Lexmark must continue to deliver outsized upside to its conservative guidance which will be harder to achieve before consumables reaccelerate on the hardware rebuild, possibly by year-end 2007. Firm's price target and estimates are unchanged.

At nearly $66, LXK shares are trading at 14.9x calendar 2007 EPS estimate of $4.40. At this level, LXK is trading slightly below HPQ, its closest printer comp, which supports Neutral rating.

Notablecalls: Bet GSCO has an investement banking relationship with LXK. So they can't put out anything really negative on the co. Not actionable.

1 comment: said...

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