Saturday, March 18, 2006

Radvision Hurt, But Not Dead

A reader writes in: "...last week you said 'don't ever sell RVSN' but its been tanking ever since, what did you overlook? Have you changed your mind or is this a normal corrective reaction?" says: "...the stock has sliced through some major moving averages, so there is some cause for concern. But we still like the name and its squeaky clean balance sheet -- they have almost $5 a share in cash, zero debt, and 2 attractive business streams that are 'acquirable' -- the company is better today than it's ever been -- there is no denying that. As far as were concerned, no significant negative news has surfaced, so don't lose sleep."

For new readers, here is that bullish Radvision report:
When young, unknown companies abruptly sign major contracts with the US government, it’s a good sign. Shares of Radvision (RVSN) are up over 60% since we recommended the stock at $12 on September 10.

Israel-based Radvision specializes in video conferencing services and equipment. In addition, Radvision just struck a deal with the Pentagon, which is revamping its networking systems and included Radvision among the few lucky companies contracted to coordinate the military’s communications & IT efforts abroad.

Radvision has $100M in the bank and no debt. We see revenues topping $70 million this year and jumping to $100 million in 2006. With only four analysts covering the stock and just 20 million shares outstanding, Radvision could pop on even the faintest of news. Trading at just 5X sales (industry trades at 8X sales), Radvision and its growth prospects are too hard to pass up, in other words. We forsee double digit growth and possibly, a takeover deal.

…just this week we learned that Hewlett Packard (HPQ) has made a splash in the videoconferencing space vis-a-vis its $500,00 a year Halo system. This could prompt either Cisco (CSCO) or Nortel to snap up a first mover like RVSN. We’re upping our price target to $30, based on projected 2006 EPS of $1, a 25 P/E multiple, and $5 a share in cash. Do anything, but whatever you do, don’t sell this stock.

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