Friedman, Billings, Ramsey out positive on Teletech (NASDAQ:TTEC), raising price tgt to $22 from $18 as they continue to believe TTEC will be one of the main beneficiaries to the positive secular trends in the customer care BPO industry. Firm believes the opportunity with the stock is due to the valuation discount versus that of its peers due to the Newgen unit. They believe greater clarity regarding the future of this unit over the coming quarters will relieve an overhang in the minds of investors.
Firm also believes consensus revenue estimates are likely too low, implying organic growth of less than 5% for 2H06 versus over 12% for the first two quarters, and are expecting strong results. As a result, the sell-side is significantly discounting the CY07 EPS guidance by a factor of 30% and, after reporting a few solid quarters and when Newgen's fate becomes certain, they would expect estimates to come up.
Firm believes TTEC is positioned to exceed CY07 consensus expectations given its recent deal signings and its pipeline, in addition to the growth in its existing customer base. TTEC has announced several large wins over the last few months, in addition to being more confident regarding the willingness of its clients to outsource more than ever before.
Notablecalls: The stock has had a nice run since mid-July. However, the guys from FBR seem to have enough conviction to extend the run for a few more days.