In a report published Tuesday, JMP Securities analyst Greg McDowell downgraded the rating on Nice-Systems Ltd. (ADR) (NASDAQ: NICE) from Market Outperform to Market Perform, and removed the $58.00 price target.
In the report, JMP Securities noted, “We are downgrading NICE Systems to Market Perform from Market Outperform as we feel the risk/return trade-off is balanced at the current valuation, given the ~50% gain in the stock in the last six months (versus NASDAQ up ~11%) and we see a lack of foreseeable catalysts to drive the multiple higher.
“The main positive of this story is that we believe NICE’s management team is doing an admirable job: 1) executing on its mission; 2) growing its analytics portfolio; and 3) driving operational excellence in the business. The risk that causes us to move to the sidelines, with the stock trading ~3% above our prior $58 price target, is that we do not expect the company to significantly accelerate growth in 2015, and with shares trading at peak historical forward P/E multiples (19x versus a five-year average of ~15x), we think this is a good time to step to the sidelines.
“We maintain our 2015 non-GAAP EPS estimate of $3.13 (versus consensus of $3.13), and lower our 2016 non-GAAP EPS estimate from $3.76 to $3.56 (versus consensus of $3.48). NICE shares trade at 3x EV/2016 revenue, 6x EV/2016 recurring revenue, and 19x and 17x our 2015 and 2016 EPS estimates, respectively.”
Nice-Systems closed on Monday at $59.80.
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