Merrill Lynch today raised its recommendation for Amdocs Ltd. (NYSE: DOX) to "Buy" with a target price of $37, after the company published its financial report for the fiscal first quarter of 2010 yesterday, beating analysts' revenue and profit forecasts.
Merrill Lynch analyst Tal Liani raised his recommendation for Amdocs from "Neutral", on the basis of his earnings per share forecast of $2.46 for 2011 and a profit multiple of 15. He noted that he had recently downgraded the share to "Neutral" on concerns that recovery may take time to materialize. However, "growth seems to return faster than we had anticipated, which warrants a more positive view on the stock."
Liani said, "Amdocs is likely gearing up to make acquisitions in 2010. We anticipate the deals to mostly augment the interactive portfolio, where Amdocs is looking to offer a more complete service of application procurement and management systems to carries and application developers. The company is historically strict in evaluating deal economies, and we therefore expect minimal dilution levels and relatively small deal sizes. The company has $6.25 in cash per share."
Liani says, "Over the last few years, management has taken the right steps to broaden the portfolio and go after new opportunities, such as OSS, cable billing, data and emerging markets." He added, "We started noticing growing presence in the Tier2/3 carriers market, a historically weak market for Amdocs, giving its relatively high pricing structure… Amdocs has announced several such small contracts with Tier2/3 carriers, including DAVE Wireless Inc., MetroPCS Communications Inc. (NYSE: PCS), Clearwire Corporation (Nasdaq: CLWR), and now Vonage Holding Corporation (NYSE: VG). Collectively, these represent a new growth avenue for Amdocs, and could sum up to a noticeable amount."
Amdocs' share closed at $28.52 yesterday, giving a market cap of $5.86 billion. The share rose 1% in after-hours trading.
Published by Globes [online], Israel business news - www.globes-online.com - on January 21, 2010
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