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Cowen’s Louis Miscioscia yesterday started coverage of Sun Microsystems (SUNW) with a Neutral rating, citing concern on the stock’s valuation. “We believe investors are pushing the envelope on how much the company can deliver for revenue growth and [operating expense] cuts over the next three years,” he wrote.

This, combined with a full valuation of 17x our CY ‘09 EPS est of 38 cents, makes for an unattractive investment proposition at this time…Too much risk, and too little potential reward.

Miscioscia expects the company to earn 11 cents a share in the June 2007 fiscal year, with 23 cents in fiscal 2008 and 34 cents in fiscal 2009. He notes that at 17x ‘09 it has a higher P/E than both IBM (NYSE:IBM) and HP (NYSE:HPQ), both at 14-15x 2007 and 13-14x 2008. “This suggests that Sun will have to significantly overachieve our aggressive estimates, or deliver them faster than expected,” he writes. “We view the shares to be fully valued at current levels.”

Sun yesterday was down 11 cents at $6.38.

Source: Sun: Too Much Risk, Too Little Reward