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Technology Stocks : SONS
SONS 7.830+2.8%Nov 28 4:00 PM EST
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To: Cooters who wrote (791)12/12/2006 8:09:07 AM
From: Cooters  Read Replies (1) of 1575
 
Also from RJ yesterday

SONS: Establishing 2008 Estimates, $7.75 Target

* We are establishing a 2008 non-GAAP EPS estimate of $0.29 and raising our target to $7.75 from $6. We believe Sonus is well-positioned to continue to grow in the highly attractive VoIP softswitch/media gateway market.
Despite being smaller than most of its competitors, the company has distinguished itself with high-capacity, flexible software and media gateways. Such a technology lead has proven even more valuable as VoIP traffic volumes accelerate and competitors merge and reevaluate platforms.

* In our view, the VoIP softswitch market has a strong 25%+ growth path ahead given low penetration today. We believe VoIP traffic is less than 20% of total long distance traffic and less than 5% of total local access traffic.
Because of the ROI from VoIP technology (derived from 30%+ lower operating expense and more value-added services relative to legacy technology) we believe all operators (wireline, wireless, cable, ISPs) will continue to rollout VoIP services.

* Our 2008 non-GAAP EPS estimate assumes 21.5% revenue growth and operating margins of 18.4%. We believe there is room for upside on revenues given market growth and our operating margins are at the lower end of their target range.
With $168 million in NOLs, we do not expect Sonus to pay a full tax rate until 2009. Our $7.75 target is based on about 27x our 2008 estimate. 27x is about 1x growth and supported by our EV/FCF/G analysis. At $7.75, SONS would offer
an attractive 4% FCF yield.
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