Tuesday, October 10, 2006

Calls of Note Part 3

- Merrill Lynch is raising their price objective on Business Objects (NASDAQ:BOBJ) to $43 from $32 to reflect healthy fundamentals, seasonal tailwinds and multiple expansion. Quarterly checks suggest strong performance for BI and data integration, while current 4Q forecasts offer ample room for revenues and EPS upside.

Much of the recent strength in the stock comes from speculation Business Objects is an imminent acquisition target. While the firm believes such a scenario is possible, they hesitate to value the stock purely on takeout speculation. Nonetheless, valuation leaves room for upside purely on fundamentals.

Current migration activity within the extensive installed base appears to be driving momentum for new product sales. They expect improvement from Europe with steady acceleration expected into Q4. With strong seasonal spending trends, 3Q eamings expected later this month and a User Conference in early November; they see sufficient catalysts to drive the stock higher in coming weeks.

Notablecalls: Were it a smaller firm issuing the call, I would disregard it due to the run the stock has had. But in Merrill's case, there may be enough following the create some additional buy interest. Don't overstay your welcome, though.

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