Merrill Lynch reiterates its “Buy” rating and target price of $10 for AudioCodes Ltd. (Nasdaq: AUDC; TASE: AUDC) in a new report ahead of the publication of the company’s financial report for the second quarter, due on August 7.
Merrill Lynch predicts that AudioCodes will slightly beat its forecasts of $37.3 million revenue and pro-forma earnings per share (EPS) (excluding options) of $0.02, “driven by strength in European VoIP deployments and APAC (Nuera) revenue recognition. The upside is mainly a result of the lowered expectations, and the visibility remains limited. However, we believe estimates are conservative and see 30% upside to our 2007 EPS estimate.
“We project third quarter sales of $39.9 million (7% higher than for the second quarter) slightly ahead of the street at $39.3 million. Operating expenses control could help EPS, leading us to model $0.05 for the second quarter, $0.01 above street consensus. We expect AudioCodes to benefit from VoIP strength at its large OEM partners like Nortel (enterprise VoIP), Alcatel-Lucent (IMS wins) and Ericsson (Telefonica VoIP contract), and also benefit from direct sales to T-Mobile (Session Border Controllers) and FT (Media Gateways). Checks suggest AudioCodes (Nuera) is also competing for a cable VoIP media gateway opportunity at Comcast and a decision could come in the next few weeks.
“While 2007 got-off to a weak start for AudioCodes and visibility remains limited, we believe expectations remain achievable given the secular growth in underlying VoIP media gateway mark. When AudioCodes reported first quarter results, it guided 2007 sales to $155-160 million, and pro forma EPS of $0.12-0.15. However, we see 2007 EPS upside to greater than $0.20, or over 30% potential upside to company's guidance, as gross margins improve with sequential sales growth, and as ongoing restructuring (cost cuts) bear fruit.”
Published by Globes [online], Israel business news - www.globes.co.il - on July 16, 2007
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