Saturday, April 07, 2007

Barron's Summary (SCUR, ALLT)

According to the Barron’s , Allianz's ADS (AZ) and its German shares have surged in the past two years but could still gain at least 20% more if the company continues to deliver improved financial performance.

At 56, Gannett (GCI) sells for a depressed 12x estd '07 earnings. The shares could rise to 65 if the co deploys its cash wisely, perhaps by lifting its $1.24 payout to $3.50. Credit Suisse analyst Debra Schwartz, who upgraded Gannett to Outperform from Neutral, eith $65 tgt, wrote in a note that a "significant potential catalyst" for the co's stock price would be the use of its "free cash." Although the co doesn't have an activist shareholder base, she said mgmt is "under pressure to improve returns."

Thanks to a growing share of a strong market, Interface (IFSIA) could enjoy sustainable 25% sales gains. The stock could jump by as much as 35%.

“Sizing Uo Small Caps” column out on Secure Computing (SCUR), saying that the co is the biggest pure play in the rapidly growing enterprise network-security segment. There are scads of tiny rivals that lack scale and there are larger, better known names, but they've traditionally served the consumer security mkts. And more recently there are major networking and storage outfits that have begun to step up their efforts. But as they gear up, SCUR remains the No. 1 player in the enterprise fire-wall mkt and offers a suite of other well-regarded products. Wall St. has taken note. Following stellar 4Q earnings, SCUR shares surged by more than 2pts, giving them a robust P/E multiple of 21 based on ‘08 ests. Around current $8 level, some investors and analysts see a buying opportunity. Lazard software analyst Joel Fishbein, for instance, recently reiterated his Buy on the stock near 8 and maintains a price tgt of 10. He ests SCUR could earn 53c a share next year, well above the 44c consensus est.

“Technology Trader” column discusses Deep Packet Inspection, or DPI, technology. Such gear lets carriers look inside the data packets that cross their network, to determine if the traffic is e-mail, video or voice. The largest DPI vendor is Cisco. But another DPI leader is selling at a bargain price, after warning investors last week that its MarQ sales will fall short of expectations. Allot Comm. (ALLT) fell from above 9 to around 7, for a mkt value of about $145m. Allot expected sales of almost $10m in the MarQ, but admitted last Mon that they will probably fall below $8.3m. Yet Allot says that it's doing fine in its direct sales to telecom carriers. IR head Jay Kalish told that the co is a contender in many of the ongoing requisition plans, with a box Allot is developing that will run at 10 Gigabits a second. The product will be available in the 3Q. Meanwhile, Allot had more than $80m in cash on Dec 31., so the disappointed stock mkt is really valuing the co at about $70m. That's around 1.5x this year's sales for Allot. Cisco may get its big share of DPI installations, but there's plenty of non-Cisco infrastructure out there. Allot will surely get share, too.

According to the “Follow Up”, it isn't check-out time yet, as Pet-Smart (PETM) plans lots of hotel openings to cash in on the pet-services boom. "There's another 20%" upside, says Ken Stuzin, of Brown Investment Advisory. He adds that the stock, which ran into some volatility on recent news of tainted pet food, could reach 40 in 12 mo’s. Stuzin agrees with the consensus est that PetSmart will earn $1.66 a share in its year ended Jan’08, but he sees $1.97 in the following year, a dime above the consensus. Even if the economy slows, Stuzin says, more Americans, regardless of income, will treat their pets as ppl and "look at other places to cut" expenses.

Vadim Zlotnikov, of Sanford C. Bernstein, calls the LBO bets part of a "bubble of stability", widespread trades, principally by hedge funds, based on assumptions that mkts will remain calm and generous. He's scanned the smaller-cap universe for stocks with concentrated hedge-fund ownership, low trading liquidity and a premium valuation, which could mean outsized risk should the "stability trade" expire. Some names to be wary of: CXW, BSG, EFD, POS, GVA, GMST, IT and DLM. These stocks remain hazardous to short. But those hoping to hit the private-equity lottery with any of them should recognize that faster money has gotten there first.

1 comment:

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