Salomon Smith Barney cut its share rating on Comdisco (CDO ) to outperform from buy.
Analyst John Jones says the company's stock has appreciated 40% from a recent low of $10.50 on December 21, 2000. He feels the risk rating is currently appropriate, as the company has a heavy debt load and a substantial interest expense. Jones says he is concerned about profitability in Comdisco's services business, where investments are still being made to build Web-ability services with profitability expected in the second half of fiscal 2002 (Sept.). He notes that Comdisco's network management group continues to lose money even as the company pulls out. Additionally, Jones says he expects revenues from ventures, which have been big profit generator, to slow.
The analyst cut his $1.85 fiscal 2001 EPS estimate to $1.70. Jones has an $18 18-month price target on the shares.