Though he has kept a Sell recommendation on shares of Avici Systems (AVCI) for quite some time, Zacks senior technology analyst Steve Biggs, CFA makes a minor upward adjustment to his six-month target price:
'Although strong end-of-life router sales are driving better-than-expected revenue, our long-term outlook for Avici Systems remains unchanged. We believe Soapstone offers a unique product and are encouraged by its compatibility with Nortel and Extreme, however we expect revenues to ramp slowly.
'Six months from now, investors will likely be concerned about a lack of visibility into revenue growth from software. As such, we maintain a Sell rating on the shares with a slightly higher six-month price target of $7.50 to account for a higher cash balance.
'Third quarter results were actually below our expectations, but the company expects to make this up in the fourth quarter. Our price target looks out six months, at which point product revenue for router sales in 2007 will be irrelevant to the company's valuation. Once router sales are complete, the stock should begin to trade on its current cash position, plus the value of a call option for the Soapstone business.'
Read the full analyst report on AVCI.
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