Trading wildly over the past six months -- from just under $7 per share to over $13, and back again -- Avici Systems (AVCI) currently rates a Sell, according to Zacks senior technology analyst Steve Biggs, CFA. His latest research report supplies the details:
'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 but that revenues will be slow to ramp. Six months from now, investors will likely be concerned about a lack of visibility into revenue growth from software.
'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. With 2007 revenue tracking well over initial expectations, we have raised our estimate for AVCI's year-end per share cash balance from $3.00 to $5.86.
'That said, we maintain a Sell rating on the shares. Given a company in the early stages that Soapstone is in, we believe a call option would be worth approximately $1 at this point. We therefore retain our price target of $7.00, which is approximately the value of cash on hand and $1 for Soapstone.'
Read the analyst report on AVCI
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