A Wall St analyst covering CSC has said that the king has no clothes. At last!
According to an article in Washington Business Journal; Rod Bourgeois, founder of DeepDive Equity Research,
describes CSC as a risky bet whose current value is between $33 and $40 Our thanks to the reader who told us about this article, which can be found here
Bourgeois knows CSC well, having previously followed them
as an analyst for Sandford C Bernstein. He did not behave
like a CSC groupie at the quarterly Analyst conferences, but nor did we hear him expressing much skepticism of CSC pronouncements either. Maybe he is now giving his own opinion instead of having to express the party line of his former employer.
The reasons he gives for his opinion are:
· Emerging Patterns suggest CSC turnaround effort is stumbling
· Revenue and margins below expectations
· “Over-earning” from balance sheet improvements; cost savings now largely realized
· Choppy cash flow, with recent improvements being due to short-term factors such as tax and pension benefits
· Lack of specifics on the second phase of the company’s turnaround plans.
Mr Bourgeois compares CSC turnaround efforts to those of
EDS, which failed when the focus turned to revenue growth. He also feels that a CSC takeover could be viewed as a desperation-move for an acquirer.
With a current price of around $66, there is a tremendous
risk involved in CSC shares today, if one believes Mr Bourgeois’ thesis, which we do and as we have said for some time.
We also wonder how confident other Wall St analysts are
with their employers’ official opinions and published target prices for CSC. Or now that Rod Bourgeois has said that the king has no clothes, will other analysts start getting real?
All together now ............
The King is in the altogether, but altogether, the altogether He's altogether as naked as the day that he was born The King is in the altogether, but altogether, the altogether It's altogether the very least the King has ever worn"
posted by Littlejohn