Thursday, October 26, 2006

Calls of Note Part 2

And now for today's favourite fade opporunity:

- Citigroup is upgrading Business Objects (NASDAQ:BOBJ) to Buy from Hold following strong results announced last night.

According to Citi BOBJ reported stellar 3Q06 results with licence revenues of $131.6m (CIR: $122.0m), total revenues of $310.4m (CIR: $295.1m; BOBJ guidance: $293m-$298m), pro forma EBITA of $53.0m (CIR: $43.7m) and pro forma EPS of $0.41 (CIR: $0.34; BOBJ guidance $0.32-$0.35).

The strong set of numbers and increase to 4Q06 guidance is an indication that the business is back on track. Management appears confident about the general environment, upgrade opportunit,y and Johnson Controls shows it is winning all important standardisation deals. After a frustrating 2Q06 wobble the firm notes they have renewed confidence in management's ability to execute and are upgrading the stock to reflect the strong fundamentals and consensus increases that are likely. They have increased their price target to $45 which reflects a modest 8% growth rate and 20% operating margin in their DCF model (both of which should be more than achievable).

Notablecalls: Yeah, Q2 was weak. Several deals failed to close. Fortunately for the co, the deals closed in Q3, helping to produce a qtr that was somewhat stronger than analysts were expecting. The funniest part? Citi downgraded BOBJ on July 26. Just before things got better. I think the money that helped the stock to move from sub-$20 will be looking for an exit. Getting out while things look good makes sense. There has been talk of a possible acquisition and I must say the valuation already reflects it, thus making it less likely. Think one needs to put BOBJ on the radar looking for cracks in buy interest above $36 level.


BULL said...

Why is it FORM is already down 4 pts before market opens? Does make it hard for the lil guy doesnt it?

stock trader said...

Great calls so far, too bad BOBJ seems to be a stinker, too much downside support because of takeover possibility.

notablecalls said...

Bull, FORM was down 4 pts already in after hours trading. I've seen only a handful of little guys make it in the mkt.

stock trader, I must admit BOBJ may be a stinker in the s-t. It looked like it wanted to start tanking (just before 10:00 ET) but rebounded pretty sharply. Still worth keeping on the radar though