FYI:
Ran across this re:CYBR from Lehman, they seem to like the prospects, as do I. The analyst likes the stock enough to hold some hizzelf, it seems!
=============================LEHMAN BROTHERS INC.==============================
Headline: Cybermedia Inc: Best Small Cap Idea for Xmas-1st Derivative of Windows 98
Rating: 1
Author: Michael E. Stanek 1(415)274-5336
Company: CYBR
Subject: COM,CUS
Industry: COMPUT
Text: Ticker : CYBR Rank(Prev): 1-Buy Rank(Curr): 1-Buy
Price : $17 7/16 52wk Range: $26-7.88 Price Target: $30
Today's Date : 08/13/97
Fiscal Year : DEC
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EPS 1996 1997 1998 1999
QTR. Actual Prev. Curr. Prev. Curr. Prev. Curr.
1st: -0.10A 0.10A 0.10A 0.18E 0.18E - -E - -E
2nd: -0.12A 0.14A 0.14A 0.19E 0.19E - -E - -E
3rd: -0.17A 0.14E 0.14E 0.19E 0.19E - -E - -E
4th: 0.01A 0.18E 0.18E 0.20E 0.20E - -E - -E
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Year:$ -0.38A $ 0.56E $ 0.56E $ 0.76E $ 0.76E $ - -E $ - -E
Street Est.: $ 0.49E $ 0.54E $ 0.69E $ 0.77E $ - -E $ - -E
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Price (As of 8/12) : $17 1/2 Revenue (1997) : 81.5 Mil.
Return On Equity (97): N/A Proj. 5yr EPS Grth : 35.0 %
Shares Outstanding : 12.4 Mil. Dividend Yield : N/A
Mkt Capitalization : 216.25 Mil. P/E 1997; 1998 : 31.1 X; 22.9 X
Current Book Value : $4.31 /sh Convertible : - -
Debt-to-Capital : 0.0 % Disclosure(s) : C, A
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* Reiterating our 1-Buy recommendation on CyberMedia-our single best small cap
idea going into the 1997 Christmas selling season.
* Company well positioned to capitalize on two key events: 1) Upgrade cycle
to First Aid 98 and 2) the timely release of Microsoft's Windows 98 operating
system in March 1998 quarter.
* Impressive line-up of new products scheduled for next few months: First Aid
98 (Sept Qtr), GuardDog (Sept Qtr), and corporate version of First Aid (Dec
Qtr).
* Company has posted impressive three quarters of upside surprises since IPO
(Revenues 30%, EPS 100%). Believe there is upside to our Fiscal 1997 and
Fiscal 1998 estimates of $0.56 and $0.76. FY 98 could be spectacular given
Windows 98 release.
* Maintaining our 1-Buy recommendation and $30 price target.
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CyberMedia remains well positioned to capitalize on two major factors which
should provide significant leverage to our Fiscal 97 and 98 estimates. The
first factor is an impressive product lineup anchored by a major upgrade cycle
for its flagship product First Aid. The second relevant factor is the release
of Windows 98 that will ship in March 1998 quarter. These two factors, taken
together, should provide strong upside potential to our FY97 and FY98 revenue
and earnings estimates.
We expect the next upgrade to the First Aid franchise, First Aid 98, to be a
strong seller this coming Fall and Christmas. First Aid 97 was an enormous
success last Christmas, despite the fact that Microsoft did not release a
major upgrade to Windows 95. As the launch of Windows 98 approaches, we
believe consumers will be driven to CyberMedia's automated tech support
software as an inexpensive alternative to costly, and time-consuming telephone
tech support. Historically, major OS shipments from Microsoft have yielded
high attach rates for the First Aid line. A First Aid version for the
corporate market is likely to ship in the December quarter providing further
incremental opportunities in FY98.
Moreover, the First Aid brand has staying power. Since going public in the
Fall of 1996, the company has consistently held top positions in the monthly
PC Data retail polls for business applications software. First Aid 97 Deluxe
is holding to the number four spot, and First Aid 97 standard edition is
holding the number nine spot. We liken First Aid to Intuit's Quicken which
has come to dominate the personal finance category despite repeated attempts
by competitors to uproot its high market share. Additionally, Oil Change, and
the recently acquired Uninstaller, provide CyberMedia with smaller, yet
vibrant, revenue streams. From a financial standpoint, over the three
reported quarters since the IPO, CyberMedia has in total beaten our revenues
estimates by 30%, and earnings by 100%.
We have watched the company flawlessly execute on its business objectives over
two key product cycles. The company is now on the cusp of another important
product introduction. The bear case on CyberMedia is that there is doubt that
First Aid 98 will ship in time for the September quarter. This skepticism is
based on the fact that the company expects to ship the product in the latter
part of September. A missed ship date presents investors with the possibility
of a loss in the quarter. Our view is that a missed ship date is a risk with
any software company, but if a highly anticipated product release slips into
the next quarter, the market tends to be forgiving as these down drafts tend
to be short-lived. We believe the 6-12 month appreciative potential of the
stock outweighs any near-term risk associated with a product slip.
Our discussions with management and the channel lead us to believe that
inventories of First Aid 97 remain under control as the company draws them
down in anticipation of a timely release of First Aid 98. We believe that the
total return rate for CyberMedia is less than 3%. Reserves for returns have
been historically three times actual returns and continue to run at this
trend. The final issue bothering investors has been the issue of DSO's
climbing to approximately 100 days in the June quarter. We believe this is
attributable to the fact that international sales have grown to over 20% of
revenues, and that First Aid 97 is reaching the end of its product life cycle.
We believe CyberMedia represents an excellent play on the consumer software
market this holiday season. Additionally, First Aid is a first derivative
play on the Windows 98 release which should provide CyberMedia with
sustainable staying power as week look out to Fiscal 1998. At CyberMedia's
current valuation, a rock bottom two times Fiscal 98 revenues of $114 million,
the market may already be assuming the product will slip. We believe there is
considerable firepower to our earnings estimates, particularly given the
impressive line-up of new products for this Fall (First Aid for Windows 98,
Guard Dog-a personal firewall, and the corporate First Aid product). We
believe CyberMedia has the potential to generate continued upside to our $0.76
estimate and believe the stock could trade into the thirties.
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BUSINESS DESCRIPTION: Cybermedia is the leading provider of automated
technical support software for the Windows PC platform.
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Disclosure Legend: A-Lehman Brothers Inc. managed or co-managed within the
past three years a public offering of securities for this company. B-An
employee of Lehman Brothers Inc. is a director of this company. C-Lehman
Brothers Inc. makes a market in the securities of this company. G-The Lehman
Brothers analyst who covers this company also has position in its securities. |
