Wedbush Morgan Initiates Coverage on SkillSoft (SKIL) with a Neutral

October 7, 2009 1:25 PM EDT

Wedbush Morgan initiates coverage on SkillSoft (Nasdaq: SKIL) with a Neutral. Price target $10.50.

Wedbush analyst says, "While SkillSoft’s valuation and return to our target is less attractive relative to other names in our coverage universe, we maintain a positive bias on the name given the stable recurring revenue model, meaningful cash flow generation, and conservative consensus EPS estimates for fiscal 2010 and 2011. We look to be more constructive at lower levels. Our multiple reflects the company’s reliable cash flow but lack of revenue growth. We expect the stock’s valuation multiple to increase as the company starts to post accelerating organic revenue growth, which we think could occur in fiscal 2H11 or 2012."

"Thesis: Given SkillSoft’s prospects for anemic revenue growth and the potential for flat to declining margins on an organic basis over the next two years, we believe that management could once again undertake a transformative event to create shareholder value. We believe it probable that management pursues further acquisitions, including eLearning or talent management vendors, or seeks a sale of the company. Until such an event occurs, we do not see meaningful upside to where shares are currently trading."

To see more analyst ratings on SKIL Click Here.

SkillSoft Public Limited Company provides on-demand e-learning and performance support solutions for enterprises, government, education, and small and medium-sized businesses worldwide.

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