Canaccord Genuity on Technology/Enterprise Software: Assessing Q4/11 Currency Risk in Software & Calling Out the Favorites
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Rating Summary:
48 Buy, 20 Hold, 4 Sell
Rating Trend: = Flat
Today's Overall Ratings:
Up: 8 | Down: 5 | New: 26
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Canaccord Genuity on Technology/Enterprise Software: Assessing Q4/11 currency risk in software and calling out the favorites
Analyst, Richard Davis, said, "While we believe the January software rally is justified by fundamentals, we likewise won’t be surprised if investors over-react to low-end-of-the range revenues caused entirely by a 9% drop in the Euro and 4% decline in the Pound since the end of October."
"In this note we highlight companies with the highest exposure to the declining European currencies. We considered changing our estimates based on our approximations, but decided not to begin down a slippery slope that given today’s volatile economy could lead us to publishing estimate changes on a weekly basis. Our focus remains steadfast on fundamentals – and we evaluate management execution based on constant currency results. While we expect investors to begin assessing value on that basis, we have been around long enough to know that irrationality can emerge, if only for brief periods. Thus, we would suggest waiting to establish a full position in the high-Europe-exposure companies simply because we don’t like to get investors into stocks a couple of weeks ahead of a possible 5% drop due to headline risk. However, from illogical actions by others come opportunities for investors. Our favorite stocks, based on fundamentals, valuation and near-term stock price upside potential going into the Q4 prints are salesforce.com (Nasdaq: CRM), Constant Contact (Nasdaq: CTCT), Carbonite (Nasdaq: CARB) and Monotype Imaging (Nasdaq: TYPE)."
Analyst, Richard Davis, said, "While we believe the January software rally is justified by fundamentals, we likewise won’t be surprised if investors over-react to low-end-of-the range revenues caused entirely by a 9% drop in the Euro and 4% decline in the Pound since the end of October."
"In this note we highlight companies with the highest exposure to the declining European currencies. We considered changing our estimates based on our approximations, but decided not to begin down a slippery slope that given today’s volatile economy could lead us to publishing estimate changes on a weekly basis. Our focus remains steadfast on fundamentals – and we evaluate management execution based on constant currency results. While we expect investors to begin assessing value on that basis, we have been around long enough to know that irrationality can emerge, if only for brief periods. Thus, we would suggest waiting to establish a full position in the high-Europe-exposure companies simply because we don’t like to get investors into stocks a couple of weeks ahead of a possible 5% drop due to headline risk. However, from illogical actions by others come opportunities for investors. Our favorite stocks, based on fundamentals, valuation and near-term stock price upside potential going into the Q4 prints are salesforce.com (Nasdaq: CRM), Constant Contact (Nasdaq: CTCT), Carbonite (Nasdaq: CARB) and Monotype Imaging (Nasdaq: TYPE)."
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