Investors on Wednesday bought into Compaq Computer Corp. officials' bullish forecast of annual sales of more than $50 billion by the year 2000, sending the stock up $4.69 a share to $74.06 in afternoon trading.
The impressive surge follows a $5-a-share jump Tuesday as investors scurried to get in on news that the PC maker's unit sales for the current quarter will improve by more than 50 percent from the same period last year.
"Compaq's up there with the big names in the industry and they certainly deserve the high valuation they are receiving," said Wendy Abramowitz, an analyst at Argus Research. "When they set a target of $40 billion by 2000, that was very achievable internally. They could get to $50 billion, but that will likely mean another outside acquisition."
Chief Financial Officer Earl Mason made the bold predictions during an analyst conference in Boston. However, he did warn that some of the unit price upside would be affected by unfavorable currency translation and lower prices in the notebook segment of the market.
Jim Poyner, an analyst at Oppenheimer & Co., said the 50 percent increase in unit sales and the company's aggressive build-to-order strategy should return a profit of about 67 cents per share this quarter.
"It's very likely, after teasing out the charges from the Tandem deal, they could beat the Street again this quarter like they did last quarter," he said. "But even though the unit sales are improving, the average selling prices for all the PC makers are under a lot of pressure."
Compaq officials said the integration of recently acquired Tandem Computers Inc. will be completed within a month.
Lehman Brothers Inc. on Wednesday upgraded Compaq's stock to "outperform" from "neutral."
"They have a lot of confidence right now and you can see why," Abramowitz said. "They keep increasing their earnings and margins to the levels that guys like IBM, Sun Microsystems and Hewlett-Packard have enjoyed."