The Long Case for AudioCodes (AUDC)

Yesterday, I saw two warm recommendations for AudioCodes (Nasdaq: AUDC). One was from CIBC Capital Markets, and the other from Merrill Lynch. Both are are happy with the steps AudioCodes has been taking, and quite rightly so, since its acquisitions have enabled it to expand it the range of services it offers communications infrastructure manufacturers.

Both these leading investment banks rate AudioCodes "Buy". Merrill Lynch set a target price of $16 -- 45% above the current market price. CIBC is more conservative, setting a target price of $14 -- 27% above the stock price today.

As I mentioned, the company is expanding its product range and is making a forceful entry into one of the growing markets in the communications field, armed with excellent strategic alliances, and plenty of cash left over to make more acquisitions of the type it made recently. In the case of AudioCodes, the stock prices, as investors see them, are not determined by analysts, nor the economic situation, the quality of the company, or the political situation. The price is determined by what I call “the risk potential” by which I mean the “general risk” that is built around comparative analysis of risk levels for every stock.

AudioCodes is exactly same company that it was in January 2005 when it had a stock price of $17. It reached this price after it ended 2004 with sales of $82.7 million and a net profit of $5 million. It ended 2005 with sales of $116 million and a profit of $13.4 million. The consensus is that AudioCodes will end 2006 with sales of $150 million and a net profit in excess of $18 million, but the stock price is now 35% lower than it was back then. This indicates a change of perspective, a new scale of values.

Published originally by Globes [online], Israel business news - www.globes.co.il
© Copyright of Globes Publisher Itonut (1983) Ltd. 2006. Republished on Seeking Alpha with full permission.