May 21, 2001 11:07 AM
John Cregan at Wit SoundView
Agile Software Corp.
Stock Pick Agile Software Corp.
Recent Price $20
Price Target $25
Reason to Buy The stock has been unfairly beaten down in the rush to devalue B2B companies. Agile's software plays a key role in manufacturing outsourcing.
For a time, stocks of "B2B e-commerce" companies rode a rocket to the stratosphere. Lately, that designation has been the kiss of death. Agile Software Corp. {AGIL, News, Boards} did not escape this fate, but the stock is showing clear signs of rebirth. The stock has more than doubled in price in the last two months.
John Cregan, stock analyst at Wit SoundView, says there is good reason for the rebound. Agile has one of the strongest business models in the B2B sector and it has remarkably clear earnings visibility for a software company, he says.
Agile is scheduled to report quarterly results on Tuesday. Analysts on average expect the company to report a 5-cent per share loss for its April quarter, compared to a 2-cent loss a year ago, according to First Call. Analysts also predict an 8-cent per share loss for the fiscal year just ending on $87 million in revenue.
Last week, Cregan reiterated his "strong buy" rating on Agile, with a $25 price target.
Agile sells collaborative software used to manage supply chain information between companies and their manufacturing networks. Agile's software is an integral part of the manufacturing process for many companies, a fact that company officials have stressed since the pure-dot-com bubble burst.
Agile's customer base consists of more than 600 electronics companies and 14 of the top 15 contract manufacturers including Solectron, SCI Systems, and Benchmark Electronics.
Business is booming for those Agile customers on the strength of an ongoing trend that has seen consumer electronics companies farm out an increasing share of their manufacturing activities. Less than 10 percent of manufacturing work was outsourced three or four years ago, Agile's CEO Bryan Stolle recently said.
The share of assembly and manufacturing work that is farmed out to other companies is now headed toward 70 percent, and Agile is a big beneficiary of that trend.
Agile is expected to realize a loss for the fiscal year just ended. Stolle has said the company is comfortable with analysts' projections of a 3-cent profit on revenue of $127 million in the new fiscal year.
Just a few months ago, it looked like Agile Software wouldn't be around to usher in a new fiscal year. The company had agreed to be acquired by Ariba, the one-time B2B e-commerce king. But the dot-com crash virtually demolished Ariba, which is not trading below $7 a share, more than 96 percent off its high of last fall.
That was reason enough for Agile to back out of the deal before it was finalized.
Stolle described the demise of the merger as "bitter sweet." Nonetheless, he says Agile's prospects are better than ever. The company has $300 million in cash and expectations of near-term profits, he adds.
In any future mergers, Agile would be the acquirer, Stolle says.
Mon May 21 12:17:37 EDT 2001 |
