VASCO Data Security (VDSI) and the 50% Drop
There's over-actors like Jim Carrey and Robin Williams, then there's the latest backlash to VASCO Data Security Intl., Inc.'s (NASDAQ:VDSI) stock price. Since Oct 24th, VDSI shares have fallen 50% after missing Q3 analyst's estimates by 2 cents. Needless to say, much like Jim Carrey freaking the hell out and being annoying in every movie he's ever made (minus 'The Truman Show'), Wall Street is doing the same over VASCO.
Here's the kicker, VASCO Data revenues for Q3 2007 increased 60% over Q3 2006. Their operating income increased 66% over Q3 2006 and the order backlog for Q4 at $33.4 million is best in the Company's history. VASCO reaffirmed their full-year 2007 guidance for revenue growth, gross margins and operating margins on last months earnings call but the Street is spanking them a new one.
VASCO is a world-leader for strong User Authentication with a customer base of more than 6,000 companies in more than 100 countries, including approximately 950 international financial institutions. They provide products to secure sensitive information and transactions in the financial, government, education, healthcare, technology, manufacturing and telecommunications industries.
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Since when has winning 608 new customers in the third quarter, including 106 banks and 502 enterprise security customers been a bad thing?
Missing by 2 cents? Oh baby pants Wall Street analysts, is the little baby okay wearing his baby pants? Ohhh, little baby pants missed and now you're selling all your shares? Cry away like Ace Ventura with a gun to your head (great movie by the way) but the guys that buy now will be saying 'LOOO-HOOO-ZUH-HER!' to those who didn't a month from now.
On October 30th, RBC Capital Markets analyst Robert Breza upgraded shares of VDSI to "Sector Perform" or "Hold" from "Underperform" or "Sell" and maintained his $26 price target.
"We believe a significant amount of the risk has been removed from the stock given the valuation reset," Breza said in a client note.
Due to a $33.4 million backlog of firm orders to be shipped in the fourth quarter, compared with a $21.5 million backlog in the year-ago period, fourth-quarter results should meet analysts' forecasts, Breza said. Analysts forecast earnings per share of 20 cents.
"Longer-term, we continue to believe Vasco is in the right market with the right products but will need to continue to execute in the face of a difficult industry backdrop," Breza said.
On November 19th, Friedman Billings upgraded VDSI to "Outperform" and set a $33 price target.
Friedman said they were cautious on VASCO heading into 3Q07, but they believe the precipitous decline in shares over the last few weeks is now overdone and represents a buying opportunity. Friedman says recent checks have been positive, as they have not sensed that the malaise from the credit markets/financials has negatively impacted VDSI's business to date.
So shares of VASCO sit at $21 this week because of crappy market conditions, what do you think they'll do next week?
Article by Frank Lara Jr.
Contributor at TheStockMasters.com
Disclaimer: The Author does not hold any positions or shares in the securities mentioned in this publication, but plans on buying soon.
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