June 16, 2000

Tektronix moves into high growth markets

Stock prices reflect Thursday's close. The Dow gained 27 points to 10,715 The Nasdaq moved 48 points higher to 3,846 and the S&P 500 gained 8 points to close at 1,479.

Analysts use the following guidelines for their recommendations:

• Strong buy, buy or highest.
  
• Buy/accumulate, mild buy, outperform, attractive or above average.
  
• Neutral, hold, reasonably priced, average or market performer.
  
• Mild sell, unattractive, below average or underperform.
  
• Sell, lowest.

Tektronix, Inc.
(TEK, $60 13/16)

52-week high: $71 3/4
52-week low: $24 15/16

Strong buy. Tektronix announced new products this week that bolstered Dain Rauscher analysts' confidence in the company's earnings growth outlook.

The Beaverton, Ore.-based company designs and manufactures test and measurement, color printing and video networking products. Tektronix's new products include the OTS9010 and Q8326 -- test systems for high-speed optical networks.

"The product is needed by computer and telecommunications customers in meeting demand for increasing bandwidth due to increased Internet traffic and requirements for streaming video services," said Dain Rauscher's Laurel Johnson. The company also announced the CMU200, a universal radio communications tester that allows cell phone manufacturers to quickly and accurately test mobile phones for quality and functionality.

"Tektronix is moving into new, high growth markets such as optical fiber switching and wireless network test and measurement," said Johnson. "We expect these markets to be excellent growth markets for TEK and believe the company is well positioned to benefit from market growth in these segments as its products are essential to the design and development of these new technologies." Rauscher sets a 12-month price target of $86.

Drugstore.com
(DSCM, $8 1/4)

52-week high: $70
52-week low: $5 7/8

Strong buy. After a meeting this week with Drugstore.com CEO Peter Neupert, Pacific Crest analyst Steve Weinstein said business remains robust and that Drugstore is "extremely well positioned" for the long term.

The addition of an Amazon.com tab has had a tremendous impact on traffic for Drugstore, Weinstein said. The company also allows customers to pay online, with an in-store pick-up.

"New design features, such as side view shopping cart and a tighter integration of content, has led to increases in the average number of items purchased," he said. "We believe that Drugstore.com is the strongest and best positioned competitor in the online health and beauty space. With a market cap of $350 million, we believe that the potential upside outweighs any risks."

52-week high: $38 1/16
52-week low: $16 7/8

Buy. Though U.S. Bancorp got caught in the bank sector downdraft early Thursday -- sparked by an earnings warning from Wachovia Corp. -- Ragen MacKenzie analyst Jay Tejera said the company's current price-to-earnings ratio is at a discount to its peer group.

Tejera said a slow underwriting calendar for dot.coms will negatively affect revenues at the company's Piper Jaffray unit. "Piper did 47 public offerings in first quarter 2000, and all but three were technology related," he said. "The spring 2000 correction in technology stocks should reduce the flow; these are very profitable transactions."

Ragen MacKenzie's fiscal year 2001 estimate assumes 9 percent loan growth, stable margins, healthy capital markets and modestly higher credit costs. "The major fundamental investment issue is the health of the retail bank, which saw positive account growth in 1Q 2000 for the first time in eight quarters," he said. Tejera sets a year-end price target of $33.

52-week high: $15
52-week low: $7 7/16

Outperform. Cascade recently reported diluted EPS for the first quarter ended April 30. The results beat D.A. Davidson & Co.'s estimates, with $0.42 per share.

Cascade is the leading worldwide manufacturer of attachments, forks and other accessories for lift trucks. The company in 1996 and '97 completed a series of acquisitions that transformed it from a primarily domestic manufacturer of attachments to an international supplier of a range of lift truck accessories.

Sales during the recent quarter increased by 2.8 percent. "The market strength reflects continued customer demand for lift trucks," said John Rogers. "We believe that strong orders will continue to drive higher revenues. Our estimates, however, do reflect a slowdown from current levels based upon indications of slowing economic growth."

The company last quarter announced that President and CEO Robert Warren Jr. is exploring a possible leverage buy-out of the public shareholders. In a take-out by either management or an outside group, Rogers estimated shares of Cascade could be worth $15 based on a multiple of five times earnings before income tax and depreciation allowance (EBITDA).

52-week high: $113
52-week low: $40 7/16

Buy. Roger Tilton of Salomon Smith Barney estimates that Amazon's international and new business should grow at a combined rate of 214 percent year-over-year, to more than $1 billion in revenue.

"We believe that the core business of books, music and video will continue to grow in the 45 percent to 50 percent range on a year-over-year basis," he said. "We believe that Amazon's pure product gross profit, less shipping and media contribution, will be 19.6 percent for the year."

52-week high: $132
52-week low: $33 13/16

Market perform. Adobe reported better than expected second quarter results Thursday, beating Pacific Crest estimates. Consensus diluted earnings per share was $0.48, and Adobe reported $0.52. This compares with diluted earnings per share of $0.35 reported in 2Q 1999.

Adobe achieved record revenue of $300 million, compared with $245 million in 2Q 1999, and $282 million in 1Q 2000.

"Our Web publishing and Acrobat revenue accelerated, and our overall business continues to be fueled by the Internet," Adobe CEO John E. Warnock said Thursday. "We are in the best position in the company's 17-year history."

Still, Jeffrey Goverman of Pacific Crest has reservations about the stock's price. "ADBE remains well positioned from both a product and operational standpoint," he said. "It's just a question of valuation."

Previous columns:

• Nike maintains a strong foothold, 06-09-2000
• Esterline lifted by aerospace biz, 06-02-2000
• RealNetworks builds on market leadership, 05-26-2000
• DJC Northwest Stock Watch, 05-19-2000
• Northwest Stock Report, 05-12-2000
• Northwest Stock Watch, 05-05-2000
• NW stock watch, 04-28-2000