>Here's a list of analyst firms that cover Comverse Technology.
thanks, mark. i wonder if there's a point of diminishing returns when it comes to the number of "analyst recommendations" on a stock? perhaps so, but not if they continue to underestimate us.
i note that zacks has 11 analyst recommendations: 8 strongs and 3 mods. lehman bro's, bobby s, and the piper cited below: CMVT makes another smartmoney screen.
hope you're enjoying the ride.
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July 7, 1998
DAILY SCREEN ARCHIVE
CONSISTENT SURPRISES
NEVER underestimate the value of consistency.
That's the lesson of Comverse Technology (CMVT), a Woodbury, N.Y.-based telecommunication equipment maker that has made it onto our new earnings estimate revision screen for the past six weeks in a row. That's particularly impressive considering the fact that the new formula places a premium on consistent earnings growth. Comverse certainly shines in that department: The company has beaten analysts' earnings estimates for the past 16 quarters.
So what's behind the unprecedented string of positive surprises? Part of the reason simply may be that Comverse is in a rapidly growing business: The company provides wireless and wireline telephone companies the technology to offer their customers a range of services from voice mail and fax on demand to voice activated dialing. More than 250 telephone companies worldwide, including 100 digital wireless network operators, count themselves as Comverse clients.
The other reason may be that analysts have been unduly worried about the impact of Asia's economic woes on the company. Last January Comverse's stock was trading as low as 30 1/4 after it acquired competitor Boston Technology. Not only were investors experiencing the usual jitters that accompany tech company mergers; they were also in a state of panic because Boston Technology was going to increase Comverse's exposure to Asia. Boston controlled 98% of the market in Japan. For the combined company the total revenue from that region increased from a percentage in the low teens to 18%.
Analysts immediately scaled back their estimates and discounted Asia out of their financial models. Investors sold their holdings. The company used this time to fully integrate Boston into its business and take the necessary write-offs. By the time the first quarter came around, expectations were so low, that the company blew the estimates out of the water. In the first quarter, Comverse beat estimates by 7 cents, earning 51 cents a share. Its sales increased 27% and its earnings soared 55% over the previous year. Not bad considering the economic turmoil in Asia has yet to improve. Strong demand in America and Europe helped offset weak sales in Asia.
Now, Wall Street is finally beginning to recognize the company's potential. Even after the company's shares hit a new 52-week high Monday, the majority of analysts continue to believe that the stock is undervalued. Earlier this month, Tim Luke of Lehman Brothers placed the company on the brokerage firm's annual list of "10 Uncommon Values." This list has been created to find overlooked stocks that should beat the market over the next 12 months.
Even more significant, Comverse has become an important institutional holding. "Like Lucent, [Comverse] has become such an important part of fund managers' portfolios," says Victor Halpert of BancAmerica Robertson Stephens. Fund managers realize that if they like telecom equipment makers, they need to own Comverse -- it controls 40% of the enhanced service platform, or ESP, market, Halpert says.
What will drive Comverse's earnings from here on in? In the company's most recent earnings release, Comverse CEO Kobi Alexander explains that the company is benefiting from a "major global market transition" from analog to digital cellular technology. Between wireless and wireline telephone customers, Comverse's worldwide market is expected to grow at a rate of at least 25%, excluding Asia, and in excess of 30% if the troubled Pacific Rim region is included.
The company also plans to compete in the prepaid calling card and cellular service market -- a potentially lucrative business, especially in the developing world. "If you look on First Call, very few companies have this type of momentum right now," Halpert says.
The only risk here is that there are a lot of players in the prepaid market. And Comverse may not be the first company that comes to mind when its customers are making a technology decision. But the other competitors tend to be smaller companies that only offer this service. Also, in the last six to nine months Comverse has stepped up its marketing and sales divisions to pursue this opportunity. As Comverse continues to ramp up its marketing in this sector, its previous relationships with the telecom companies should help it win this additional business. "Who you know is important; it's an old boys network," says Ted Jackson of Piper Jaffray.
SmartMoney has been tracking Comverse since November 1996 when the magazine selected it as one of the "Best Investments for 1997." Since then, the stock has returned 73%. As strong as Comverse's story sounds, we can't promise an equal return on your investment in the future. On the other hand, as long as the company keeps beating earnings estimates, its stock should continue to prosper.
-- By Stacey L. Bradford
smartmoney.com
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