|The market liked the news. Based on the expectation of a settlement, an analyst upgraded the shares and put out a target price of $17.|
Knot Shares Leap on Potential Settlement
Thursday January 19, 3:57 pm ET
Investors Take Leap on Knot Shares After Analyst Says WeddingChannel Settlement Likely
NEW YORK (AP) -- Investors took a leap on wedding media company Knot Inc. Thursday, sending its shares up 19 percent after an analyst said Knot is likely to settle a lawsuit filed by rival WeddingChannel.com Inc.
Knot shares, which more than doubled in price last year, gained $2.25, or 19 percent, to $14.06 in afternoon trading on the Nasdaq. Over the past 52 weeks, Knot's shares have traded between $4.98 and $14.39.
Parham Ghorban, an analyst at Roth Capital Partners, issued a research report earlier Thursday predicting that Knot will probably resolve a patent suit filed by WeddingChannel two years ago. Ghorban cited Knot's announcement late Wednesday that both companies have asked to postpone court proceedings in the case for at least 60 days.
WeddingChannel, whose site carries news, advice and other wedding-related services, filed a lawsuit in the U.S. District Court in Manhattan against Knot in September 2003. WeddingChannel claims that Knot is infringing on one of its patents and has said it would seek damages of up to more than $13 million.
Knot said in a regulatory filing late Wednesday that a stay was entered in the case, at the joint request of both companies.
"We believe the stopping of the judicial proceeding one month before the scheduled trial indicates that both parties have agreed to discuss settlement options," Ghorban said.
Ghorban raised his rating on Knot to "Strong Buy" from "Neutral" and increased his price target to $17 from $12. Ghorban also raised his profit expectations for Knot, saying he expects Knot's legal costs to be lower this year.
"A settlement would resolve a two-year feud that has hurt both companies, remove an earnings drag of roughly 10 percent of revenues and highlight the true earnings power of The Knot," Ghorban said.
The analyst now expects Knot to report 2006 earnings of 45 cents per share, up from 31 cents. Wall Street has pegged Knot's 2006 earnings at 34 cents per share, according to Thomson Financial.