JetForm Weakness Spells Opportunity: Buy (10/30) Individual Investor Online Analysis
Due to concerns about slower earnings and resulting jittery market conditions for high-tech issues, shares of JetForm Corp. (NASDAQ: FORMF) have remained under pressure, slipping more than 15% since mid-September. But that just strikes as a buying opportunity. The company continues to enhance its product line and sign up new high-profile partners, which will help to sustain the strong performance registered in recent quarters.
JetForm expanded the potential market for one of its flagship products, InTempo, with the introduction of software that will be running on servers powered by Sun's Solaris operating system. The latest move represents a significant market opportunity as, according to Lehman Brothers, Solaris claims approximately 30% of the U.S. market for server operating systems. JetForm expects to commence shipments of InTempo for Solaris this month.
In September, the company unveiled its FormFlow 99 and announced plans to incorporate electronic billing forms, which are designed specifically for aerospace and defense contractors, into JetForm's Output Pak 5.2 for R/3 software provided by SAP. The new version of the Output Pak will support multiple operating system platforms, including Windows NT, Sun Solaris, Digital Unix, and several others.
Alliances
On October 12, JetForm also announced its strategic alliance with VeriSign, a provider of encryption solutions, to incorporate VeriSign's technology into JetForm's FormFlow 99 product. Although we do not expect this agreement to add to JetForm's top line, it considerably enhances one of the company's leading electronic form products by offering a security technology from one of the leading vendors specifically requested by some of JetForm's customers.
Xerox Deal
One of the most significant developments at the company has been its cooperative deal with Xerox (NYSE: XRX). According to the agreement, the two companies will be marketing an integrated product, which includes JetForm's Output Pak software as well as electronic forms and Xerox's printers, to users of SAP's R/3 system. Based on conversations with JetForm's management, we believe that the agreement with Xerox should not materially impact JetForm's revenue and earnings in the upcoming quarters.
The significance of the deal is that, for JetForm, the partnership translates into more than 1,200 Xerox sales representatives marketing JetForm's core technologies. In addition, the company gains access to Xerox's corporate customer base. JetForm and Xerox have already secured licensing agreements with large corporate and governmental customers, including Wolverine Worldwide, a shoe marketer, and Moen, a manufacturer of plumbing equipment.
On October 13, JetForm struck a distribution deal with another powerful partner. Standard Register, an Ohio-based provider of a document management technology with annual revenue of about $1.4 billion, agreed to become a Value Added Reseller (VAR) of JetForm's electronic form, output management, and workflow software products. JetForm's management indicated that the agreement should not significantly affect the company's performance. The important benefit that JetForm derives from this partnership is the ability to access Standard Register's large customer base.
Despite all these positive developments, shares of JetForm are trading at just 18 times our fiscal 1999 earnings estimate of US$0.79 per share. We believe that investors should take advantage of this attractive buying opportunity.
Bottom Line:
We reiterate out Buy recommendation of JetForm with a 9-to-12-month price target of $28, or 35 times our fiscal 1999 earnings estimate.
Updated 10/30/98 with FORMF at $14.38. Recommended 11/18/97 at $15.94. |
