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Benchmark Releases 2015 Top Picks (IRBT) (ATVI) (OTEX) (RMBS) (more...)

December 29, 2014 4:36 PM EST
Get Alerts IRBT Hot Sheet
Price: $8.76 +1.98%

Rating Summary:
    4 Buy, 10 Hold, 1 Sell

Rating Trend: = Flat

Today's Overall Ratings:
    Up: 13 | Down: 11 | New: 11
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Benchmark released its Best Ideas for 2015 across various sectors they cover.

Defense & Homeland Security (Josephine Millward)

  • iRobot Corporation (NASDAQ: IRBT) (Buy, $55 PT) - We believe iRobot is well-positioned for LT growth supported by its strong robotics tech IP and product portfolio.
  • OSI Systems (NASDAQ: OSIS) (Buy, $82 PT) - We believe OSIS remains attractive at the current level. The stock is still trading at below the Defense sector average of 9x while it offers above average growth prospects. We think the stock is well-positioned to outperform in 2015 again after a strong 2014 with potential upside from both Healthcare and Security

Enterprise Software (Mark Schappel)

  • Progress Software (NASDAQ: PRGS) (Buy, $29 PT) - We think Progress Software (PRGS) is poised to outperform going into 2015, even though the stock rose sharply in 2H14. In particular, we think the Telerik acquisition pumped new energy into the company and is primed to kick-start PRGS’s cloud app development business, which is the company’s most important upside driver and the key to its long-term success. We also like PRGS’s strong cash generation, above-average operating margins and relatively inexpensive valuation (≈8.5x EV/2016E EBITDA, pre Telerik).
  • Open Text Corp (NASDAQ: OTEX) (Buy, $62 PT) - Trading around 11x EV/FY16 EBITDA, we think the stock can continue to run as management has built good momentum in its Project Red Oxygen content management release and built positive leverage from its acquisition of GXS.

Healthcare Technology (Jan Wald)

  • DexCom (NASDAQ: DXCM) (Buy, $69 PT) - In our last best picks, we emphasized the diabetes space. We continue to believe that Diabetes and especially the portion devoted to Continuous Glucose Monitoring (CGM) will remain strong. DexCom stock never looks cheap, but neither is it expensive from a long-term perspective. Only 10% of the Type 1 population is currently using a CGM, so a significant runway for adoption and growth remains. It has the best-in-class sensor and algorithm suite on the market and is moving ever closer to fingerstick accuracy and labeling for direct not adjunctive use with fingersticks.
  • Cardiovascular Systems (NASDAQ: CSII) (Buy, $42 PT) - We believe that Cardiovascular Systems has a unique, easy to use product that faces very little competition in the marketplace. In other words, we believe that Cardiovascular Systems basically has a clear playing field with which to operate, and where it is operating, ridding peripheral and coronary arteries of highly calcified plaques, is experiencing higher than normal levels of growth as interventional cardiologists look for higher- risk procedures to build their practices.

Internet (Daniel L. Kurnos)

  • Blucora, Inc. (NASDAQ: BCOR) (Buy, $21 PT) - Shares of Blucora continue to reflect negative equity value for both Search and Ecommerce. We believe management is implementing a comprehensive strategy to stabilize the core, non-tax business by 2H15. Improvements in overall partner quality and a repositioning to be closer to the end-user could help drive extended user engagement and enhance lifetime value in Search. A more targeted marketing approach at Monoprice could improve customer acquisition cost and lead to better brand awareness, accelerating growth.
  • United Online (NASDAQ: UNTD) (Buy, $20 PT) - United currently stands at a crossroads as it implements an aggressive modernization strategy within its Content & Media segment to stem subscriber losses and develops its 4G wireless broadband, MVNO and MyPoints platforms to provide avenues for growth. We believe the changes implemented by new CEO Francis Lobo and new CFO Ed Zinser have already begun to reshape the corporate culture and have significantly improved the likelihood of longer-term success.

Publishing & Broadcasting (Edward J. Atorino)

  • Gannett (NYSE: GCI) (Buy, $39 PT) - With the separation of Gannett’s newspaper publishing operations (through a tax-free spin-off to shareholders) expected to be completed in mid-2015, Gannett’s broadcasting and digital operations will form a separate company... seems well positioned to finish the year on a strong note with further growth in 2015.
  • Media General (NYSE: MEG) (Buy, $25 PT) - On March 21, 2014, Media General announced a combination with LIN Media LLC, which created the third largest pureplay television broadcasting company in the United States based number of stations and the fourth largest based on percentage of U.S. TV households reached... As potential upside, Media General has already doubled its projected synergy outlook from the Young transaction, opening up the possibility to similar expectations for Lin.

Semiconductors & Equipment (Gary Mobley)

  • Rambus, Inc. (NASDAQ: RMBS) (Buy, $16 PT) - As one of our top Buy-rated ideas, the investment thesis of Rambus centers on our belief the company will continue to forge deeper relationships with leading memory suppliers and system-onchip (SoC) companies. In essence, we believe Rambus will continue to shed its reputation as a patent troll and will increasingly engage with customers as a collaborative design IP company similar to ARM Holdings. While Rambus operates as both a patent and design IP-company, management found it difficult to engage with potential customers for licensing memory or serial link design IP while the company was simultaneously embroiled in a patent battle with the potential licensee.
  • MaxLinear (NYSE: MXL) (Buy, $11 PT) - MaxLinear is a high-quality, albeit niche, application-specific analog IC company solving complex RF issues. As evident in the company’s 62%-ish GM, the company benefits from high barriers to competition. Additionally, the company should manage to grow much faster than the overall analog IC market given the company’s expanding product portfolio. Following a disappointing 3Q14, we believe MaxLinear’s cable-related sales are poised to re-accelerate in the near-term, and we believe FY15 consensus est. may now be conservative.

Technology, Media & Telecom (Mike Hickey)

  • Activision Blizzard (NASDAQ: ATVI) (Buy, $24.04 PT) - We are optimistic about the Company’s forward growth opportunity, potentially benefiting from an exciting set of forthcoming Blizzard products, Call of Duty extension to the China market, strong launch of current-gen consoles and potential digital sales acceleration; offset somewhat by less measurable product catalysts, prior-gen market deterioration and potential fatigue from Call of Duty and Skylanders franchises. We believe the Company’s valuation has somewhat de-risked current execution / forward guidance risk, with the share price trading roughly 16% lower from early September highs as Destiny dropped and investors' attention transitioned to their forward growth potential that had less visibility.
  • GameStop (NYSE: GME) ($28.98 PT) (Bearish) - We believe the Company’s core business model; the physical distribution of hardware, software and used product through a traditional retail network, will be increasingly displaced from growing consumer adoption of digital / streaming / subscription content service channels and the competitive pressure from mobile platforms, an ecosystem we anticipate will extend to the living room. We remain concerned that investor confidence balances precariously over the perceived long term value of their core business model; a potential market / operational disruption, could shift focus over to the outmoded nature of physical delivery while resetting an aggressive short thesis that can be challenging to disprove. We believe the console will complete the turn to digital within the next five years, which would effectively dislocate the Company’s performance foundation.



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