|BBND: Merrill Boosts Rating; Finds Customer Worries Overblown|
July 10, 2007, Posted by Eric Savitz
BigBand Networks (BBND) is higher today after Merrill Lynch’s Tal Liani raised his rating on the stock from Buy to Neutral. He says the stock as of last night offered an attractive entry point after a 36% slide from its peak on what he says were “overblown concerns regarding key customers.”
The company provides “switched video” hardware to Verizon (VZ), Cablevision (CVC), Time Warner Cable (TWC), among others. Liani says he believes the company also has a strong position at Comcast (CMCSA), “where we expect it to share the opportunity with Cisco (CSCO).”
Liani says the company has opportunities beyond the switched video market. He says BigBand should benefit from three growth drivers: an increasing number of users receiving tailor made services; rising demand for more video channels, especially in high def; and investment in new applications by carriers.
Liani says he expects revenue to grow 30% a year over the next two years, with EPS growth of 127% this year and 63% next year. He has a $17 price target on the stock, based on 26x estimates 2008 earnings power of 65 cents a share.
BigBand today is up $1.34, or 10%, to $14.46.