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Technology Stocks : Aladdin Knowledge Systems (ALDN)
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To: av ram who wrote (250)5/6/1998 9:35:00 PM
From: FrLR  Read Replies (1) of 351
 
Aladdin's EPS report was IMHO not as good as I had hoped. It also was a slowdown in EPS growth from last quarter. The market has been ugly since the report came out so the stock which is up 3/8 this week is acting well on a relative basis. The management said in the conference call that they were disappointed in the ASE sales, but they were now trying a new marketing method with this business (OEM's). In fact, though they failed to mention any names they indicated they were talking with several PC companies that would put the ASE tools on certain PCs. This was seen as something that would attract buyers to a certain PC because they had this perk. They also indicated they have plenty of cash and continue to look for acquisitions. The core business ( software security) was strong as they said they continue to take market share from RNBO.

All of this considered, one might conclude that the stock is dead for
the next couple of quarters because seasonally the are stronger in Q4 and Q1(just reported). The stock is now down to 18% EPS growth, but it sells at a trailing PE of 13. Now EPS growth for the remainder of this year is expected to show little or no growth and then accelerate next year. Of course a good acquisition could change that and an upside surprise is very possible in EPS. Besides a PE of 11 x next year's EPS is extremely cheap. I would load up big time between 9 and 11, but it may never come.

In conclusion, I would definately hold ALDNF and accumulate for a minimum move to the mid to upper tens within one year and 25 is still not out of the question.
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