Needham & Company Lifts PT on Datalink (DTLK) after Upbeat Meetings

March 18, 2013 12:02 PM EDT Send to a Friend
Get Alerts DTLK Hot Sheet
Price: $12.91 +0.94%

Rating Summary:
    6 Buy, 1 Hold, 0 Sell

Rating Trend: Up Up

Today's Overall Ratings:
    Up: 11 | Down: 14 | New: 51
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Datalink Corporation (NASDAQ: DTLK) is solidly higher Monday after Needham & Company reiterated their Buy rating and raised their price target from $13 to $14 per share following a positive investors meetings with the company's CEO and CFO.

"The tone was quite positive from a DTLK perspective, reinforcing our confidence in its strategy and execution," analyst Glenn Hanus said.

Some of the firm's takeaways:

  • Current business solid: Sales cycles have remained on a more normal cadence discussed on 2/15 Call, suggesting 1Q is tracking to at least meet our 1Q NG EPS of $0.18 on $131M (guide of $0.15-0.20 on $127-137M). With virtually no exposure to EMEA, Federal or large banks, DTLK continues to see more stable datacenter spending among its enterprise customer base.

  • DTLK's recent transformation to a datacenter integrator (vs. storage VAR) with a much broader portfolio (i.e., IP networking/VDC, servers, expanded service offering) is driving greater wallet share in its mostly repeat customer base (90+%) leading to participation in larger deals with greater sales leverage. VDC (i.e., Cisco/EMC or NTAP) example of key product growth driver. DTLK will continue VAR acquisition strategy focused on geo footprint, skill sets and customer base.

  • GM% to hold steady as higher mix of DTLK OneCall support (30% GM vs. vendor pass through service 16% GM) is offset by mix toward lower GM% networking products. OPEX leverage with scale over time (target model of 5.5-8.0% OpM).

  • DTLK is emphasizing its top strategic partners (NTAP, EMC, HDS, CSCO, VMW, SYMC and QTM). Most recent relationships (EMC, CSCO) ramping strongly. NTAP commentary generally positive as cluster ONTAP releases viewed +, opening up broader high-end markets to NTAP. EMC incremental to NTAP business - not replacing.

  • Despite the buzz of public cloud, DTLK is confident that larger enterprises will continue to invest in their own datacenters, emphasizing private cloud.

  • Competitive Landscape: As DTLK transitions to datacenter integrator, regional storage VARs are less of a factor as it now competes with system integrators (Presidio, E+, and CDW) as well as OEMs when they go direct.

    For an analyst ratings summary and ratings history on Datalink Corporation click here. For more ratings news on Datalink Corporation click here.

    Shares of Datalink Corporation closed at $11.83 yesterday.


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    Analyst Comments, Analyst PT Change

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