Monday, June 12, 2006

Calls of Note Part 3

- FBR notes they believe JCOM is in the midst of contemplating a price increase
for its flagship consumer fax service. In firm's opinion, a price increase (currently $12.95 per month) would be a smart strategic and financial move, as they believe JCOM could add another $1 to $2 per month/per consumer and have very limited churn. If this event does happen, it would be a nice growth catalyst for both the top and bottom line in 2007. Maintains Outperform and $35 tgt.

Notablecalls: Expect to see some interest in JCOM. Note that JCOM was profiled in IBD's New America section over the weekend. Short interest stands at 24%.

- FBR thinks business conditions for ATYT have been weakened further since their April downgrade and expect a weaker than normal August quarter due to excess inventory, more aggressive pricing, and weak market conditions. Theyl ower estimates below consensus for the May and August quarters and maintain Market Perform; lower price target to $13 from $18 on lower estimates and multiple compression.

Notablecalls: Expect to see some weakness in ATYT.

- CIBC thinks that an overly glum view of RDWR's challenges has pushed shares towards trough valuations. While the firm will need to see palpable evidence of execution in the U.S. before revisiting their rating, with 2Q06 checks indicating a solid quarter, they are introducing a $15 tgt. Believes the current valuation takes as a near certainty that RDWR's third try at restructuring the U.S. sales organization will again end in disappointment. This excessively dark view creates an attractive risk/reward scenario and sets a low bar for upside. 15 price target is based on 17.5x FY07E operating EPS of $0.37 plus $8.50 in cash/share.

Notablecalls: Not actionable but good to know category.

- RBC is raising revenue estimate on RBAK for the current quarter based on continued edge router momentum, and they are raising price target from $20 to $24. Firm does not believe Redback has lost any significant customers in recent weeks. On the contrary, Redback's SmartEdge router may be gaining share at key accounts such as France Telecom and AT&T. Elsewhere, Verizon may be extending more dissatisfaction with its current edge router vendor opening a window of opportunity for Redback.

Notablecalls: Not actionable but good to know category.

- RBC is also defending POZN saying FDA's response positively resolves doubts that had existed about the efficacy achieved in the Phase III studies. Firm believes the market has overreacted to the unanswered safety question. If the FDA's safety concerns were terminal for the product, they believe the Agency would have issued a "Not-Approvable" letter. Therefore, they think the potential exists to resolve the safety issue without the need for additional safety studies.

Even if additional studies are required and final approval is delayed for more than two years, firm's discounted cash flow valuation of Trexima continues to indicate a present value of about $12/share and a peak value in 2009 of $16.50/share. Maintains Outperform.

Notablecalls: Gotta love RBC for their courage to step in and make such a call when everyone else is downgrading the stock to hell. My gut tells me the call will play out. Just wait until all the panic sellers are gone. Looke like an actionable call.

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