RBC prepares shopping list of Israeli high-tech

These firms may be in the right place at the right time.

RBC Capital Markets analyst Daniel Meron says that tech stocks are at a discount this holiday season. His holiday shopping list includes a number of Israeli blue-chip and smaller cap high-tech companies.

Meron writes, "The sub-prime ripple effect and its impact on the financial vertical and the economy at large spooked investors, triggering valuation contraction in many of our names. Our checks so far indicate business as usual in our space, though we will continue monitoring the gathering clouds as macro shifts often take a while until they dissipate to niches in the tech sector. With the bear scare, investors seem to be waiting on the sidelines."

Meron says, "We believe NDS Group plc (Nasdaq: NNDS) offers the best idea in our space for rain or shine with secular growth in pay TV subscribers to continue fueling growth and long term projects and recurring revenue."

He adds, "Amdocs Ltd. (NYSE: DOX) could also offer relative out-performance in our universe and in tech at large given its long term project cycle and mission critical nature of telecom billing. Comverse Technology Inc. (Pink Sheets: CMVT) benefits from similar trends and may offer good risk-reward here as the restructuring story is on track, yet the push-out of financial reporting has worn-off investor patience.

"Within the smaller cap names, BluePhoenix Solutions Ltd. (Nasdaq: BPHX; TASE: BPHX) may weather macro slowdown better than other names as its IT modernization solution offers cost effective upgrade path of legacy systems and company also has material backlog and long project cycles.

"For the endangered species tagged bulls, we'd be pounding the table on NICE Systems Ltd. (Nasdaq: NICE; TASE: NICE) at these levels; we are yet to see evidence for weakness in its financial sales or in fundamentals in general. Verint Systems Inc.'s (Pink Sheets: VRNT) valuation has also contracted materially as it is more susceptible to macro slowdown given its highly leveraged balance sheet post Witness Systems Inc. acquisition, which it is still busy digesting."

Meron says, "We believe fundamentals remain solid for Alvarion Ltd. (Nasdaq: ALVR; TASE: ALVR) and Ceragon Networks Ltd. (Nasdaq: CRNT; TASE:CRNT), with checks indicating spending on wireless broadband remains healthy and much of the rise in demand fueled by emerging markets growth. We believe current levels offer good entry points as valuations are more palatable given expected growth, and these names could offer good beta plays.

Published by Globes [online], Israel business news - www.globes-online.com - on November 27, 2007

© Copyright of Globes Publisher Itonut (1983) Ltd. 2007

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