Robertson Stephens Daily Growth Stock Update On CD AMZN FISV NTAP OVTI ORCL SDS TCC
VRTS
PR Newswire
Monday November 20 10:57am
SAN FRANCISCO, Nov. 20 /PRNewswire/ -- The following is being issued by Robertson Stephens, a
member of the National Association of Securities Dealers, CRD number 41271:"
Cendant Corporation (NYSE: CD) ($10.06)
F2000 EPS: $0.90 from $1.01
F2001 EPS: $0.93 from $1.16
Strong Buy
Jay Leupp, REITs/REOCs/Real Estate Services
Paul Penney, REITs/REOCs/Real Estate Services
"On Monday, November 13, we attended Cendant's (CD) annual analyst and investor day," said
Leupp and Penney. "The day included management updates on CD's primary business lines,
recent strategic acquisitions, the financial impact of the recently announced Individual
Membership spin-off, upcoming new online products and services, and the pending sale of
move.com. Overall, we were impressed with the depth of Cendant's management team and the
company's clearly defined long-term annual growth targets and its refocused efforts on getting 'back
to offense' with additional real estate and travel acquisition announcements over the next five
quarters. To account for the anticipated spin-off for the Individual Membership business, we are
lowering our 2000 and 2001 CEPS estimates by $0.11/share and $0.23/share, respectively, to
$0.90/share and $0.93/share. We expect CD to announce future quarterly results exclusive of the
Individual Membership business. It should be noted, however, that earnings attributable to the
Individual Membership business will be recognized by the shareholders of the new Individual
Membership entity. Despite lowering our 2000 and 2001 CEPS estimates, we continue believe CD
shares are a compelling long-term value. We maintain our Strong Buy rating on CD shares. Our
12-month price target is $18-19, or 20 times our revised 2001 EPS estimate of $0.93."
Comments
Amazon.com, Inc. (Nasdaq: AMZN) ($27.44)
Long-Term Attractive
Lauren Cooks Levitan, eConsumer
"Findings from our ongoing proprietary research study of Amazon's fulfillment efficiency expose
weakness in the current business model," said Levitan. "We expected to see improvements in
Amazon's fulfillment efficiency during Phase 2 of our study given the company's disclosed efforts to
reduce split shipments and 'long hauls', increase inventory turns, and balance inventory loads.
While Amazon management reported they saw improvements across all of these areas during the
third quarter, results from our study suggest higher split shipments and a greater dependency on
multiple DCs to fulfill product orders even while the customer experience remained outstanding.
Amazon recently began offering free shipping on orders with an average order value (AOV) of over
$100. While higher AOV can potentially lead to better fulfillment economics, multiple item orders
can also be more difficult to fulfill, especially given Amazon's breadth of product selection. Thus,
we believe Amazon's fulfillment operations could actually be stressed by this promotion and
dramatically increase the costs of fulfilling these orders, thereby making it more difficult for the
company to achieve its fourth quarter fulfillment efficiency targets. Despite our confidence in
Amazon's ability to hit most of its fourth quarter targets, while we would not be surprised to see a
run in shares of Amazon as we get closer to the holidays, we continue to recommend investors
remain cautious given our concerns over a drought of positive catalysts following Amazon's fourth
quarter earnings release."
Fiserv, Inc. (Nasdaq: FISV) ($49.63)
Buy
Andrew Jeffrey, eProcessing/ePayments
"We are reiterating our Buy rating on Fiserv and believe investors should become increasingly
aggressive in accumulating the shares," said Jeffrey. "Our near-term and 12-month target prices are
$57 and $68, respectively. Although the company's internal growth slowed, relative to
expectations, in the third quarter, we are increasingly confident that this deceleration will be short
lived. Our conviction stems from the fact that the company's slower growth was isolated to a small
portion of its overall business -- financial institution software -- and believe that these operations
are poised to rebound as we head into 2001. We urge investors to recognize that Fiserv is a core
holding in any mid-cap growth portfolio. The company grows revenues consistently at an 8%-10%
internal rate and earnings at an 18%-20% clip. It continues to capture market share while
demonstrating better scale and improving operating ROIC."
Network Appliance, Inc. (Nasdaq: NTAP) ($64.56)
Buy
Dane Lewis, Network Storage Systems and Software
"NTAP shares have dropped significantly over recent weeks," said Lewis. "While some of this
decline can be attributed to market weakness, we believe the majority of the decline in NTAP
shares is a function of the market pricing in an increasingly competitive market environment in the
NAS industry. Four weeks ago, NTAP traded at a rich 34 times calendar 2001 sales. We view 14.6
times calendar 2001 sales as a more appropriate and attractive valuation given NTAP's market
position. We believe that the recent discounting of NTAP shares presents an attractive entry point
for investors. Our $90 price target reflects 16 times the $2 billion in calendar 2001 revenues that
we expect NTAP to deliver. While we acknowledge that near-term appreciation will be limited by
the threat of pending competitive entries, we believe NTAP will remain the leading vendor in the
NAS space, which we expect to be a $3.5 to $4 billion market in calendar 2001. We rate NTAP
shares a Buy."
OmniVision Technologies, Inc. (Nasdaq: OVTI) ($11.00)
Buy
Dane Lewis, Network Storage Systems and Software
"OmniVision pre-announced fiscal second quarter results Friday after the close," said Lewis.
"Revenue of $18.4 million was slightly below our $19.1 million estimate while EPS was a penny
better than our $0.08 estimate. The revenue shortfall was in part due to the delayed roll-out of
Microsoft's PC video-cam software that will be postponed beyond this consumer season. While we
acknowledge that the top line was light, we believe the company remains very well positioned in
very rapidly growing markets. We believe OVTI shares are oversold at current levels and note that
OmniVision trades at a discount to its comp group. We rate OVTI shares a Buy."
Oracle Corporation (Nasdaq: ORCL) ($28.81)
Long-Term Attractive
Eric Upin, Business-to-Business eCommerce
"Oracle announced on Friday that Gary Bloom, Executive Vice President and member of the
senior management team, resigned to become the CEO of VERITAS Software," said Upin. "Bloom
plans to transition his responsibilities at Oracle until December 15. Bloom spent the past 14 years
at Oracle, most recently heading the company's core database business, worldwide marketing,
support, education, alliances, mergers and acquisitions, information technology, and the Oracle
Venture Fund. In addition, Bloom was responsible for Oracle Business Online, OracleMobile.com,
and Oracle e-Travel. We believe Bloom was widely considered to be a potential successor to Larry
Ellison, although Ellison has not announced any plans to leave the company or to vacate his
position as CEO. During a conference call hosted by Oracle on Friday afternoon, Larry Ellison
stated that the company plans to divide Bloom's responsibilities among other senior managers,
including Chuck Rozwat, Mark Jarvis, and Safra Katz. In addition, Ellison emphasized the
significant, ongoing roles that Sandy Sanderson, Jay Nussbaum, and George Roberts play in the
sales organization. On a conference call hosted by VERITAS, Bloom stated that he does not
intend to recruit employees from Oracle. This announcement follows on the heels of the departure
of Ray Lane, Oracle's former President and COO, in July. Lane's absence at the company has
impacted the applications business in particular given the prominent role he played in developing
business and managing client relationships in this area, in our opinion. Lane has not been
replaced."
Sungard Data Systems Inc (NYSE: SDS) ($47.00)
Strong Buy
Andrew Jeffrey, eProcessing/ePayment
"We are reiterating our Strong Buy rating on Sungard Data Systems and believe the shares will
trade toward $60 in the near term," said Jeffrey. "SunGard remains our favorite eProcessing
franchise name because we believe value associated with the company's sustainable internal
growth rate and operating ROIC -- 15%-18% and 43.8%, respectively -- are not fully reflected in the
shares' current valuation. We estimate that SunGard's Investment Support Services (ISS)
businesses, which account for over 75% of Sungard's revenues, can support at least 15% internal
growth for the foreseeable future. This would be about 5% faster than the market as a whole,
demonstrating the company's advantageous competitive position. We argue that SunGard's
Business Continuity and Internet Services (BCIS) division will likely emerge as an important growth
driver, augmenting its strong ISS performance. SDS shares currently trade at a 6.0 times EV/IC
multiple. However, based on the company's strong operating ROIC of nearly 44%, our analysis
indicates that the stock deserves a valuation approaching 9.0 times. This implies a stock price in
the mid-$70s, supporting our 12-month price objective."
Trammell Crow Company (NYSE: TCC) ($12.50)
Buy
Jay Leupp, REITs/REOCs/Real Estate Services
"On November 13, an investor group led by CB Richard Ellis director Richard Blum, CEO Ray
Wirta, and numerous insiders launched a bid to take the company private, offering to purchase the
62% of shares not currently held by management for approximately $194.7 million, or
$15.50/share," said Leupp. "The bid represented an approximate 18% premium to CBG's previous
closing price of $13 1/8, and 9.6 times CBG's consensus 2001 EPS estimate of $1.62. During 2000,
CBG's lumpy earnings, limited financial flexibility, and the market's fear of a slowing economy
have resulted in disappointing stock performance, with CBG's shares up a modest 5.0%
year-to-date, lagging the 19.7% average of its peers. Applying CBG's proposed takeout P/EPS
multiple of 9.6 times 2001 EPS to our $1.96 2001 EPS estimate for Trammell Crow Company, we
arrive at a comparable valuation of approximately $18-19/share. While we acknowledge that CBG's
projected 2001 earnings growth rate of 15.7% slightly exceeds TCC's 14.6%, we believe TCC's
superior balance sheet, larger market capitalization and significant international presence warrants
a comparable multiple. We maintain our 2000 and 2001 EPS estimates of $1.71 and $1.96,
respectively. We reiterate our Buy rating."
Veritas Software Corporation (Nasdaq: VRTS) ($110.19)
Buy
Dane Lewis, Network Storage Systems and Software
"Veritas announced the appointment of former Oracle executive Gary Bloom as VRTS's new
President and CEO. Mark Leslie plans to continue as Chairman of the Board and maintain an
active role working with Bloom to accomplish the company's strategic initiatives. Bloom was
recognized as a key member of Oracle's executive team, and leaves the company in very good
terms. While Bloom enjoyed his time at Oracle, he is fulfilling his desire to become a CEO. Bloom
states his appointment to CEO of Veritas will only strengthen the company's current relationship
with Oracle. We believe Gary Bloom is an impressive and meaningful addition to Veritas, bringing
years of experience in Internet and eBusiness software. The company states that Bloom is a natural
fit into Veritas' corporate culture as many of Veritas' executives have worked with him for years.
Bloom states that while he has been contacted numerous times over the past year regarding other
CEO positions, it was Oracle's strong relationship with Veritas and the company's strong leadership
position that led him to pursue and accept this new role. We believe Bloom has proven his
leadership ability through his achievements at Oracle. Bloom has broad and deep understanding
of Veritas' product line as the two companies have worked together extensively via partnerships
such as the VOS initiative. At $110.19, VRTS trades at 27.8 times calendar 2001 revenue
estimates. We believe Veritas is the clear market leader in storage management software. We rate
shares of VRTS a BUY."
Industry Updates
Health Care/Biopharmaceuticals Industry
Michael King, Biopharmaceuticals
Jay Silverman, Biopharmaceuticals
"The American Society of Hematology Meeting (ASH) will take place in San Francisco from
December 1-5, 2000," said King and Silverman. "The purpose of this report is to preview the
meeting and supplement our report dated November 3, 2000. At that time, full data from the ASH
abstracts was not yet available. We now provide investors with the results and our analysis of
several trials to be presented at ASH. ASH is an important clinical meeting for biotech companies
with products treating hematologic cancers and other blood disorders. Typically, ASH also serves as
a venue for reports on innovative therapeutics or treatment strategies. For investors, ASH is
arguably the grand finale of the year among medical conferences, and its abstracts often
dramatically affect the biotech sector."
Robertson Stephens Real Estate Weekly
Jay Leupp, REITs/REOCs/Real Estate Services
Paul Penney, REITs/REOCs/Real Estate Services
"For the week ending Friday, November 17, Real Estate Investment Trusts (REITs), as measured by
the Morgan Stanley REIT Index (RMS), posted a 1.0% return, bringing their average YTD total
return to 16.8%," said Leupp and Penney. "Over the same period, the S&P 500 and the NASDAQ
Composite Index returned 1.2% and 2.0%, respectively, bringing their YTD total returns to (6.0)%
and (25.5)%. The week ending November 17 marked the finale of the Robertson Stephens real
estate group's earnings season, with seven companies reporting earnings below our estimate, 14 in
line with our estimate and 32 outpacing our estimates. In addition, strong real estate
supply/demand fundamentals and strong rental rate growth have driven healthy average same-
store NOI growth of 6.6% for the third quarter, exceeding our 4.7% estimate."
Unless otherwise noted, prices are as of Friday, November 17, 2000
Robertson Stephens maintains a market in the shares of Amazon.com, Fiserv, Network Appliance,
OmniVision Technologies, Microsoft, Oracle, and Veritas Software and has been a managing or
comanaging underwriter for or has privately placed securities of OmniVision Technologies and
Trammel Crow within the past three years.
Robertson Stephens, Inc. and its international affiliates ("Robertson Stephens") is the leading
full-service investment bank focused exclusively on growth companies. The firm provides a
comprehensive set of investment banking products and services, including equity underwriting,
sales & trading, research, M&A advisory, convertible securities, private capital, equity derivatives,
and corporate and executive services. Robertson Stephens completed 146 deals in the United
States and Europe in the first half of 2000 valued at $48.1 billion in aggregate market value
including 70 IPOs, 56 follow-ons and 20 convertible transactions. The firm also completed 47
private capital deals and advised on 43 M&A deals in the first half of this year. The firm's more
than 40 senior equity research analysts cover more than 750 companies. Robertson Stephens, Inc.
is a member of the NASD and all major exchanges. Robertson Stephens has more than 1,500
employees worldwide with offices in San Francisco, Boston, New York, Palo Alto, Chicago, Atlanta,
London, Munich and Tel Aviv.
Robertson Stephens, Inc. ("Robertson Stephens") is a NASD member and a member of all major
exchanges and SIPC.
The information contained herein is not a complete analysis of every material fact respecting any
company, industry or security. Although opinions and estimates expressed herein reflect the current
judgment of Robertson Stephens, the information upon which such opinions and estimates are
based is not necessarily updated on a regular basis; when it is, the date of the change in estimate
will be noted. In addition, opinions and estimates are subject to change without notice. This
Report contains forward-looking statements, which involve risks and uncertainties. Actual results
may differ significantly from the results described in the forward-looking statements. Factors that
might cause such a difference include, but are not limited to, those discussed in "Investment Risks."
Robertson Stephens from time to time performs corporate finance or other services for some
companies described herein and may occasionally possess material, nonpublic information
regarding such companies. This information is not used in the preparation of the opinions and
estimates herein. While the information contained in this Report and the opinions contained
herein are based on sources believed to be reliable, Robertson Stephens has not independently
verified the facts, assumptions and estimates contained in this Report. Accordingly, no
representation or warranty, express or implied, is made as to, and no reliance should be placed on,
the fairness, accuracy, completeness or correctness of the information and opinions contained in
this Report. Robertson Stephens, its managing directors, its affiliates, its employee investment
funds, and/or its employees, including the research analysts authoring this report, may have an
interest in the securities of the issuer(s) described and may make purchases or sales while this
Report is accessible. Robertson Stephens International, Ltd. is regulated by the Securities and
Futures Authority in the United Kingdom. This publication is not meant for private customers.
Fleet Specialist, Inc. (Member NYSE), an affiliate of Robertson Stephens, Inc., is the specialist that
makes a market in AutoNation, Inc., Cabletron Systems, Inc., Cash America International, Inc.,
Computer Associates International, Ethan Allen Interiors Inc., FelCor Lodging Trust Inc.,
Foundation Health Systems, Inc., Harrah's Entertainment, Inc., Hilton Hotels Corporation, The
Home Depot, Inc., International Game Technology, Jones Apparel Group, Inc., MGM Grand, Inc.,
National Semiconductor Corporation, Park Place Entertainment Corporation, Scientific-Atlanta,
Inc., Seagate Technology, Inc., Shurgard Storage Centers, Inc., Station Casinos Inc., The Talbots,
Inc., and Tommy Hilfiger Corporation, and at any given time, Fleet Specialist may have an
inventory position, either "long" or "short", in this security. As a result of Fleet Specialist's function
as a market maker, such specialist may be on the opposite side of orders executed on the floor of
the Exchange in this security.
Copyright * 2000 Robertson Stephens.
Source:
Robertson Stephens
Contact:
Elizabeth Denton of Robertson Stephens, 212-407-0470 |
