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Intelligent May Outsmart The Shorts


Inside Wall Street

INTELLIGENT MAY OUTSMART THE SHORTS

Computer sales have been lethargic--but not at Intelligent Electronics, a major seller of personal computers, with a network of 1,125 stores in the U. S. and Canada. Even so, its stock is in the pits, down to 21 from 37 earlier in the year as earnings per share have slumped.

But the stock's decline has attracted other investors, who insist that the company's poor earnings picture is mainly due to the 23% rise in the company's shares outstanding. In February, InEl sold 3.3 million new shares at $33 apiece to finance its acquisition of BizMart, a major chain of office-products stores. Kemp Fuller, a portfolio manager at Baird Patrick, is keen on the stock and thinks that despite the dilution, earnings for the fiscal year ended Oct. 31, 1991, will total $2.15 a share, vs. last year's $2.05. He notes that sales jumped from $1.4 billion in fiscal 1990 to an estimated $1.9 billion this year. Fuller is forecasting that earnings will rise to $2.40 a share in 1992 and $3 in fiscal 1993.

He notes that the company has managed to capture market share and open new stores despite a weak economy. With debt of only $29.9 million and shareholder equity of $263 million, "InEl's goal to boost sales to $3.5 billion by 1993 is doable," he says. Fuller expects the stock to climb to its old high of 37--which would be 12 1/2 times his estimated 1993 earnings of $3 a share.

He notes that the shorts have been zeroing in. Some 3.1 million shares, or about 17% of the company's 18 million shares outstanding, have been sold short as of Oct. 15. The shorts are betting that recession and general weakness in the computer industry will ultimately batter the stock. But if Fuller's earnings forecast is on the mark, the shorts could get caught in a painful squeeze.GENE G. MARCIAL


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